A Scatter Diagram Includes the Following Data Points

question 112

Essay

A scatter diagram includes the following data points:
Two regression models are proposed: (1) , and (2) . Using the least squares method, which of these regression models provides the better fit to the data? Why?

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Definitions:

Direct Costs

Expenses that can be directly attributed to the production of specific goods or services.

Indirect Costs

Overhead or administrative expenses that are not directly attributable to a specific product or service, but are necessary for the business operations.

Initial Direct Costs

Costs that are directly associated with securing a financing agreement or leasing an asset, excluding general overhead.

Revenue Recognition

An accounting principle that determines the specific conditions under which income becomes realized as revenue.