Past relationships between cost and activity may not be a useful basis for estimating future costs

Question

Quizplus · Accepted Answer

If future activity levels are expected to be beyond the relevant range, past relationships between cost and activity may not provide a reliable basis for cost estimation. In such a case, the cost behavior may alter, and the cost estimation approach based on past data may no longer be applicable. This can lead to inaccurate cost estimates, increasing the likelihood of cost overruns and poor decision-making.

Past Relationships Between Cost and Activity May Not Be a Useful