Calculus

Abstract

For explaining how total cost (y) varies with throughput (x) we have generally used two basic functions. They are the straight line:

$$ y = a + bx $$

((9.1))

and an equation of the second degree:

$$ y = a + bx + {c^2} $$

((9.2))

If all variable costs are simply and directly variable with output we will use equation (9.1). If not equation (9.2) may give a better and more accurate representation. It all depends on the particular business situation.