Define the terms fixed and variable cost

Reference no: EM133164220

Cost and Budgeting Questions

Question 1:

Define the terms Fixed and Variable cost.

Explain how an understanding of the distinction between fixed and variable costs can be useful to managers.

Question 2:

Most businesses seem to have a budget setting period towards the end of each year where the following year's budget are prepared (Periodic budgeting). Other businesses, however, have a ‘Continual budgeting' approach, where each month a new month's budget is prepared to replace the month that has just passed, thereby ensuring that, at all times, a budget for a full planning period is available.

What are the advantages and disadvantages of these approaches?

Question 3:

At what level can/how can you investigate variances? Remember they should not be considered in isolation.

Question 4:

a) What is meant by Break-even point (BEP) for an activity?
b) How is the BEP calculated?
c) Why is it useful to know the BEP?
d) What are the limitations of Break-even analysis?

Reference no: EM133164220

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