Managers Might Estimate a Cost Function for a Variety of Reasons

question 125

Essay

Managers might estimate a cost function for a variety of reasons including: budgeting, setting employee work schedules, or discontinuing a line of business. Consider the problem of predicting the future cost of fuel for a company's fleet of automobiles.
a)Identify three factors that might influence the actual future cost of fuel.
b)Identify and explain two potential cost drivers for the cost of fuel.
c)Suppose actual fuel costs turn out to be higher than estimated cost. Would this mean that an inappropriate estimation method was used? Explain.

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Definitions:

Early Instability

Refers to the period of inconsistency or unpredictability often found in the initial stages of a process, situation, or state.

Developmental Problems

Issues or delays in physical, emotional, or intellectual growth in children or adolescents.

Morally Acceptable

Actions or behaviors considered to be in accordance with ethical standards or societal norms.

Child-support Dodgers

Individuals who intentionally avoid or fail to provide financial support for their children's upbringing as required by legal agreements or court orders.