Which of the Following Is a Common Assumption of Cost

question 118

Multiple Choice

Which of the following is a common assumption of cost estimation?

• A) Cost behavior depends on many cost drivers.
• B) Cost behavior patterns are nonlinear outside of the relevant range.
• C) Cost behavior patterns are linear within the relevant range.
• D) Costs are curvilinear.

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Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, allowing more accurate budgeting and variance analysis.

Relevant Range

The range of activity within which assumptions about variable and fixed cost behavior are valid.

Variable Cost

Costs that vary directly with the level of production output or volume, such as raw materials and direct labor.

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours worked, multiplied by the standard labor rate.