Solutions to review questions 9.1 Three alternative linear cost functions are 1 Variable-cost function – a cost function in which total costs change in proportion to the cost driver in the relevant range. 2 Fixed-cost function – a cost function in which total costs do not change with changes to the cost driver in the relevant range. 3 Mixed-cost function – a cost function that has both variable and fixed elements. Total costs change, but not in proportion to changes in the cost driver in the relevant range. 9.2 The two assumptions are 1 Variations in the total cost of a cost object are explained by variations in a single cost driver. 2 A linear cost function adequately approximates cost behaviour within the relevant range of the cost driver. A linear cost function is a cost function, where within the relevant range, the graph of total costs versus a single cost driver forms a straight line.
