3 Residuals are independent of each other. 4 Residuals are normally distributed. 9.9 No. A cost driver is any factor whose change causes a change in the total cost of a related cost object. A cause-and-effect relationship underlies selection of a cost driver. Some users of regression analysis include numerous independent variables in a regression model in an attempt to maximise goodness of fit, irrespective of the economic plausibility of the independent variables included. Some of the independent variables included may not be cost drivers. 9.10 No. Multicollinearity exists when two or more independent variables are highly correlated with each other.
