A better database for estimating cost functions has the following characteristics:
A) Fixed costs are allocated as if they are variable costs.
B) Extreme observations are adjusted or removed.
C) Time periods differ for measuring items included in the dependent variable and the cost driver(s).
D) Homogeneous relationships between individual cost items in the outcome variable pool and cost drivers may not be present.
E) There is no causal, economically plausible relationship between individual cost items in a heterogeneous mixed pool and a single cost driver.

Question

Quizplus · Accepted Answer

Adjusting or removing extreme observations helps in creating a more accurate and reliable database for estimating cost functions by reducing the impact of outliers.

A Better Database for Estimating Cost Functions Has the Following