A linear cost equation O is derived from two elements - the relevant range and the level of activity. O is fixed when the volume is zero and increases at a constant rate per activity level after that. O includes three components - fixed costs, variable costs and mixed costs. O is used to estimate future costs.

A linear cost equation is derived from two elements - the relevant range and the level of activity. is fixed when the volume is zero and increases at a constant rate per activity level after that. includes three components - fixed costs, variable costs and mixed costs. is used to estimate future costs