Answer
When collecting cost data for variables used in a cost function, several common problems can arise:
1. Mismatched Time Periods: The time frame for measuring the dependent variable may not align with that of the cost driver, leading to inaccuracies.
2. Misallocation of Fixed Costs: Fixed costs might be treated as if they were variable, distorting the cost function.
3. Incomplete or Unreliable Data: Data may be missing for some observations or may not be consistent, making analysis challenging.
4. Extreme Values: Outliers or extreme data points can skew the results and misrepresent the relationship.
5. Inhomogeneous Relationships: The cost items within the dependent variable cost pool may not have a consistent relationship with the cost driver.
6. Changing Relationships: The connection between cost and the cost driver may not remain constant over time, affecting the accuracy of the cost function.
7. Inflation Effects: Inflation can impact the dependent variable, the cost driver, or both, making it harder to assess costs accurately.
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