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Requirement 2 . Can the constant in the cost function be used as an estimate of fixed delivery cost per month? Explain. The cost function
Requirement Can the constant in the cost function be used as an estimate of fixed delivery cost per month? Explain.
The cost function in requirement is an estimate of how costs behave
the relevant range, not at cost levels
the relevant range. If there are no
months with zero miles driven represented in the delivery cost account in the general ledger, data in that account
be used to estimate the fixed costs at the
zero miles driven level. The constant component of the cost function provides the best available starting point for a straight line that approximates how a cost behaves
within the relevant range.
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