Many Organizations Use a Linear Relationship with a Single Cost

question 94

Multiple Choice

Many organizations use a linear relationship with a single cost driver to describe a cost even though the cost may have multiple cost drivers.Why?

• A) This approach is easier and less expensive.
• B) The cost of developing a more complex function is greater than the benefit.
• C) Cost estimates from the simple function are accurate enough for most decisions.
• D) All of the above

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Definitions:

Nominal GDP

A measure of a country's economic output based on current prices, without adjusting for inflation.

Equation of Exchange

The equation of exchange is an economic formula relating the supply of money in an economy to the velocity of money, price level, and an index of expenditures.

Velocity of Money

The rate at which money circulates in the economy, calculated as the ratio of nominal GDP to the money supply.

Real GDP

Real Gross Domestic Product, which adjusts the total value of all produced goods and services within an economy in a year for the effects of inflation, showing the real terms of economic output.