Variations in the level of a single activity (the cost driver) explain the variations in the related total costs.

Cost driver

According to our textbook, the two basic assumptions used in estimating cost behavior are:

  1. Variations in the level of a single activity (the cost driver) explain the variations in the related total costs.
  2. Cost behavior is approximated by a linear cost function within the relevant range.
  3. Do you feel like in reality that most of the time neither of these things hold true or do they usually always hold true? Why or why not.
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