Chapter 1, Problem 8Q

To determine

Concept Introduction:

The managers need to know the relationship between the costs and the activities carried out for understanding the cost involved in production within the organization. The manager’s effort to understand the relationship between the cost and activity level is called cost behavior analysis. These costs consist of direct materials, direct labor and overhead costs that are incurred from developing a product. The three basic cost behavior patterns are known as fixed, variable and mixed.

To explain: The circumstances wherein the assertion that there is a strictly linear relationship between cost and level of activity valid or invalid.