Part 1: With a step fixed-cost function ________. A) fixed cost changes proporti

Question

Part 1: With a step fixed-cost function ________.              

A) fixed cost changes proportionally with the level of activity

B) the cost varies with the changes in the activity

C) fixed cost is often approximated with a continuous variable-cost function

D) the cost remains the same over wide ranges of the activity in each relevant range

Part 2: The ideal database for estimating cost functions contains ________.           

A) only the independent variable and not the dependent variable

B) numerous cost driver observations

C) cost driver observations spanning a narrow range

D) a few values of the cost driver that are grouped closely together

Explanation / Answer

Part 1

D) the cost remains the same over wide ranges of the activity in each relevant range

For example telephone bill which normally is fixed and does not change when one makes more calls locally.

Part2

B) numerous cost driver observations

Database cost function is generally related with change in the level of activity hence it is covers wide range and base on numerous observations.

Part 1

D) the cost remains the same over wide ranges of the activity in each relevant range

For example telephone bill which normally is fixed and does not change when one makes more calls locally.

Part2

B) numerous cost driver observations

Database cost function is generally related with change in the level of activity hence it is covers wide range and base on numerous observations.

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