Estimating a Cost Function Using Past Cost Data to Help

question 28

Multiple Choice

Estimating a cost function using past cost data to help determine future costs is useful if:

• A) Past costs are irrelevant and highly discretionary
• B) Past costs are irrelevant and not discretionary
• C) Past costs are relevant and highly discretionary
• D) Past costs are relevant and not discretionary

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Definitions:

Production Budget

An estimate of the total cost of production, including direct materials, labor, and overheads, planned for a certain period.

Capital Expenditures Budget

A plan for a company's spending on long-term assets, such as buildings, equipment, and machinery, over a certain period.

Inventory Policy

Inventory policy refers to the set of guidelines or rules a company follows to manage its inventory levels, ordering, storage, and replenishment to meet customer demand efficiently.

Projected Sales

The estimated revenue that a company expects to generate from goods or services over a specific period.