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Definition: A linear cost function is a mathematical method used by businesses to determine the total costs associated with a specific amount of production. This method of cost estimation can be done whenever the cost for each unit produced remains the same no matter how many units are produced. When that is the case, the linear cost function can be calculated by adding the variable cost, which is the cost per unit multiplied by the units produced, to the fixed costs. Performing this equation will give the total cost for a production order, thus enabling businesses to budget accordingly and make decisions on production amounts.
Notes: Mae’r cysyniad hwn yn cyferbynnu â “nonlinear cost”.
