Exam 5: Cost Estimation

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One way to control the effects of a nonlinear relation between total costs and volume is to reduce the relevant range.This is done as a basis for defining cost-volume-profit relationship by the use of a smaller range of data in order to avoid the need to use differential calculus.

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Which of the following may be used to estimate how inventory warehouse costs are affected by both the number of shipments and the weight of the material handled? (CPA adapted)

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A cost driver is defined as: (CMA adapted)

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Cost estimates using regression analysis are always more accurate and dependable than cost estimates using the scattergraph methods.Not always.If the data is linear the scattergraph method will give the same results as regression analysis.

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