Chapter 10 - Determining How Costs Behave - Assignment Material - Questions - Page 407: 10-3

Linear Cost Function: This is a cost function where costs change in a straight-line manner as the level of activity changes. For example, if you have a videoconferencing service with a fixed yearly charge and a per-minute usage fee, where the total cost increases linearly with the number of minutes used. Nonlinear Cost Function: In this type, the relationship between cost and activity is not a straight line. For instance, in advertising, as you increase the number of ads, the costs may not increase proportionally but might show economies of scale where you can advertise more for less cost.

Linear Cost Function: This is a cost function where costs change in a straight-line manner as the level of activity changes. For example, if you have a videoconferencing service with a fixed yearly charge and a per-minute usage fee, where the total cost increases linearly with the number of minutes used. Nonlinear Cost Function: In this type, the relationship between cost and activity is not a straight line. For instance, in advertising, as you increase the number of ads, the costs may not increase proportionally but might show economies of scale where you can advertise more for less cost.