Describe the account analysis method for estimating a cost function.
It estimates cost functions by classifying cost accounts in the subsidiary ledger as variable, fixed or mixed with respect to the identified level of activity. Typically, managers use qualitative, rather than quantitative, analysis when making these cost-classification decisions.
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Managerial Accounting
- Define Opportunity Cost.
- Can the constant in the cost function be used as an estimate for fixed cost (when calculating maintenance, etc.)?
- Name 4 approaches to estimating a cost function ?
- Describe three alternative linear cost functions ?
- What two assumptions are frequently made when estimating a cost function?
- Define Cost-Volume-Profit Analysis ?
- Define Operating Leverage ?
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