Which of the following statements are assumptions underlying cost estimation?
A) Cost behaviour depends on one or a few activities.
B) All costs are production driven.
C) There is a strong correlation between the cost and the cost driver.
D) Cost behaviour depends on one or a few activities AND there is a strong correlation between the cost and the cost driver.

Question

Quizplus · Accepted Answer

Both statements A and C are assumptions underlying cost estimation. Statement A assumes that cost behaviour depends on one or a few activities, which is often the case in reality. Statement C assumes that there is a strong correlation between the cost and the cost driver, which is also often true. Together, these assumptions lead to the conclusion that cost estimation can be based on identifying the key cost drivers for a particular activity or process.

Which of the Following Statements Are Assumptions Underlying Cost Estimation