Final answer:
The degree of association between cost and activity output is measured by the coefficient of correlation, with relationships displayed on a scatter plot and quantified through the calculation of the least-squares line and correlation coefficient.
Step-by-step explanation:
The degree of association between cost and activity output is most directly measured by the coefficient of correlation. When using size as the independent variable and cost as the dependent variable, a scatter plot can visually depict this relationship. Through inspection, one may determine if there seems to be a positive or negative correlation or no correlation at all based on whether the data points show a general upward or downward trend, or no trend. To measure this relationship quantitatively, the least-squares line is calculated through regression analysis, resulting in an equation of the form îy = a + bx, which helps predict cost based on size.
The correlation coefficient, denoted as 'r', provides a numerical value indicating the strength and direction of the linear relationship between the variables. A significant correlation coefficient means that a substantial proportion of the variation in the dependent variable can be explained by the independent variable. The coefficient of determination, r², is the square of the correlation coefficient, and represents the proportion of the variance in the dependent variable that is predictable from the independent variable.