Question

Which of the following are frequently encountered problems when collecting cost data on variables included in a cost function?

1) 1. A homogeneous relationship between the individual cost items in the dependent variable cost pool and the cost driver(s) does not exist.
2. The relationship between the cost and the cost driver is not stationary.
2) 1. Data are either not available for all observations or are not uniformly reliable.
2. Extreme values of observations occur.
3) 1. The time period used to measure the dependent variable is not properly matched with the time period used to measure the cost driver(s).
2) Fixed costs are allocated as if they are variable.
4) All of the above are correct.

Answer 1

Frequently encountered problems when collecting cost data on variables included in a cost function include a lack of a homogeneous relationship, data availability and reliability issues, mismatched time periods, and allocation of fixed costs as if they are variable.

Step-by-step explanation:

When collecting cost data on variables included in a cost function, there are several frequently encountered problems. These include:

1. A homogeneous relationship between the individual cost items in the dependent variable cost pool and the cost driver(s) may not exist. This means that the relationship between the costs and the cost driver(s) may not be consistent.
2. Data availability and reliability can be an issue. The data may not be available for all observations or may not be uniformly reliable.
3. The time period used to measure the dependent variable (cost) may not be properly matched with the time period used to measure the cost driver(s).
4. Fixed costs may be allocated as if they are variable, which can distort the cost data.

In summary, all of the above problems can arise when collecting cost data on variables included in a cost function.