. If the coefficient of correlation for machine hours is higher than the coefficient of correlation for direct labor hours, then, it is more reasonable to use the direct labor hours as a basis for computing (estimating) total cost (Y=a + bx). II. Relevant range assumptions: relevant range refers to the range of activity within which the identified cost behavior patterns are valid. Any level of activity beyond this range may show different cost behavior.

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Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.