The Logarithmic and Log-Log Models,y = β₀ + β₁ln(x)+ ε

question 95

Multiple Choice

The logarithmic and log-log models,y = β₀ + β₁ln(x) + ε and ln(y) = β₀ + β₁ ln(x) + ε,were used to fit given data on y and x,and the following table summarizes the regression results.Which of the two models provides a better fit?

• A) The logarithmic model.
• B) The log-log model.
• C) The models are not comparable.
• D) The provided information is not sufficient to make the conclusion.

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Definitions:

Activity

An event that causes the consumption of overhead resources in an organization.

Cost Driver

A factor that causes a change in the cost of an activity, such as machine-hours or labor hours, used in determining pricing and profitability.

Flexible Budgets

Budgets that adjust or flex with changes in the volume or level of activity.

Measure of Activity

An identifier used to gauge the level or intensity of activity within a certain process or system.