A cost function is a ________.
A) process of calculating present value of projected cash flows
B) process of allocating costs to cost centers or cost objects
C) mathematical description of how a cost changes with changes in the level of an activity relating to that cost
D) is a very thorough and detailed way to identifying a cost object when there is a physical relationship between inputs and outputs

Question

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A cost function is a mathematical relationship between a cost and an activity level. It describes how a cost changes with changes in the level of an activity. Choice A is describing the process of calculating present value, while choice B is describing the process of cost allocation. Choice D is referring to a specific method of identifying a cost object, but it is not a definition of a cost function.

A Cost Function Is a ________