When developing cost functions,which of the following statement is FALSE?
A)The cost function must be believable.
B)The cost function should explain past cost behavior.
C)Personal observations of costs and activities provide the best evidence of a plausible relationship between a cost and its cost driver.
D)The cost function does not have to be reliable.

Question

Quizplus · Accepted Answer

A cost function must be reliable, meaning that it accurately predicts future costs based on changes in the cost driver. If a cost function is not reliable, it cannot be used for decision-making purposes. Therefore, statement D is false. The other statements are true. A cost function should be believable, meaning that it is logical and reasonable based on known relationships between costs and cost drivers. It should also explain past cost behavior, which provides evidence of its accuracy. Personal observations of costs and activities can be useful in developing cost functions, as they may reveal patterns or potential cost drivers that are not apparent from quantitative data.

When Developing Cost Functions,which of the Following Statement Is FALSE