The cost function in requirement 1 is an estimate of how costs behave within the relevant range, not at cost levels outside the relevant range. if there are no months with zero miles driven represented in the delivery cost account in the general ledger, data in that account can be used to estimate the fixed costs at the zero miles driven level. the constant component of the cost function provides the best available starting point for a straight line that approximates how a cost behaves within the relevant range .

Suppose that a paving company produces paved parking spaces (q) using a fixed quantity of land (t) and variable quantities of cement (c) and labor (l). the firm is currently paving 1,000 parking spaces. the firm's cost of cement is $3 comma 600.003,600.00 per acre covered (c) and its cost of labor is $35.0035.00/hour (w). for the quantities of c and l that the firm has chosen, mp subscript upper c baseline equals 60mpc=60 and mp subscript upper l baseline equals 7mpl=7. is this firm minimizing its cost of producing parking spaces?