Activity-based and volume-based cost drivers are best related to linear cost estimation.
Businesses employ a mathematical technique called a linear cost function to calculate the overall costs related to a particular level of production. When the cost of producing each item is constant regardless of how many are produced, this approach of cost estimation can be used. In that situation, the linear cost function can be determined by combining the fixed costs with the variable costs, which are the cost per unit times the number of units produced.
By solving for the overall cost of a production order, businesses are able to plan their budgets and determine how much product to produce.
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