Question Details

Managers should use past data to create a cost function 



1) A linear cost function can only represent fixed cost behavior. 

2) In a graphical display of a cost function, the steepness of a line represents the total amount of fixed costs. 


3) It can be inferred that when there is a high correlation between two variables, one is the cause of the other. 



4) An example of a physical cause-and-effect relationship is when additional units of production increase total direct material costs. 


5) Managers should use past data to create a cost function and then use the exact information provided by that cost function to create the budgetary forecast for the next year.




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