Which one of the following statements about difficulties in cost estimation is true?
A) Changes in the company's production technology make estimating the company's production costs easier
B) The shorter the time period, the higher the probability of inappropriately matching activity and cost
C) The stronger the economy, the harder it is to accurately match activity and cost
D) When prices of a company's raw materials or labor are rapidly increasing, cost estimations based on previous periods will overestimate future costs

Question

Quizplus · Accepted Answer

One of the difficulties in collecting data for time periods is making sure that the cost data and the activity data are related to the same time period. Often there are lags between the end of the time period and the measurement of cost. If the time period is short, any errors related to establishing the year-end cutoff are magnified. For longer periods, the effect of the errors is diluted.

Which One of the Following Statements About Difficulties in Cost