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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?
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What's the standard deviation of the estimated returns? (Hint: Use the formula for the standard deviation of a population, not a sample.)
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