Which of the following statements related to assumptions about estimating linear cost functions is true?
A) Variations in a single cost driver explain variations in total costs.
B) A cost object is anything for which a separate measurement of costs is desired.
C) A linear function approximates cost behaviour at all ranges of production.
D) Correlation refers to the relationship between fixed and variable costs.
E) The graph of total costs does not form a straight line within the relevant range because of variable costs.

Question

Quizplus · Accepted Answer

This is a key assumption when estimating linear cost functions. It means that there is a clear cause-and-effect relationship between the cost driver and total costs.

Which of the Following Statements Related to Assumptions About Estimating