Dictionary of Accounting Terms: linearity
linearity
- in Linear Programming (LP), the requirement that the measure of effectiveness, such as contribution margin or cost and resource usage, must be proportional to the level of each activity conducted individually. For example, each unit of a resource must make the same contribution to the objective function that every other unit of that resource makes.
- in linear regression, the requirement that the relationship between a mixed cost and an activity variable such as machine-hours is straight line in the form of y = a + bx. This means that the variable portion changes by a constant amount per hour no matter how many hours are used.
