In the linear cost function, which is y = a + bx, the 'y' is classified as ___________?
Correct answer: D. predicted cost
- A. predicted fixed cost
- B. predicted variable cost
- C. predicted price
- D. predicted cost
Explanation
In y = a + bx, y represents the total predicted cost, a is fixed cost, and bx is the variable-cost portion. Therefore, y is not limited to either fixed or variable cost alone.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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