Which one of the following statements about difficulties in cost estimation is t

Question

Which one of the following statements about difficulties in cost estimation is true?

Select one:

A. When prices of a company's raw materials or labor are rapidly increasing, cost estimations based on previous periods will overestimate future costs

B. Changes in the company's production technology make estimating the company's production costs easier

C. The stronger the economy, the harder it is to accurately match activity and cost

D. The shorter the time period, the higher the probability of inappropriately matching activity and cost

Explanation / Answer

Answer: Option A

When prices of a company's raw materials or labor are rapidly increasing, cost estimations based on previous periods will overestimate future costs.Therefore option A is true regarding the difficulties in cost estimation.

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