A better database for estimating cost functions has the following characteristics.
A) Fixed costs are allocated as if they are variable costs.
B) Extreme observations are adjusted or removed.
C) Time periods differ for measuring items included in the dependent variable and the cost driver(s).
D) Homogeneous relationships between individual cost items in the dependent variable pool and cost drivers may not be present.
E) There is no causal, economically plausible relationship between individual cost items in a heterogeneous mixed pool and a single cost driver.

Question

Quizplus · Accepted Answer

Extreme observations, which can distort the analysis, should be adjusted or removed to improve the accuracy of cost function estimation. This helps in creating a more reliable database by ensuring that outliers do not skew the results.

A Better Database for Estimating Cost Functions Has the Following