Question

What​ assumption(s) are frequently made when estimating a cost​ function? A. Variations in the level of a single activity explain the variations in the related total costs. B. Cost behavior is approximated by a linear function within the relevant range. C. Both of the above. D. Neither of the above.

Answer 1

Answer: The correct answer is "C. Both of the above.".

Explanation: Generally, when estimating a cost function, assumptions are frequently made that the variations in the level of a single activity have as a consequence and are the cause of the variations that occur in the total related costs.

It is also assumed that the behavior of a cost can be approximated through a linear function within the relevant range.