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How costs behave as the level of activity/volume changes. Why an understanding of cost behaviour is important ?
Types
Variable e.g. petrol, direct materials
Fixed e.g. car tax, factory rental
Semi-variable (Hybrid) e.g. phone bill. Cost separation is the process of separating the fixed and variable elements of a semi variable cost.
Methods
High – Low Method
Regression Analysis
Cost Separation
Why an understanding of cost behaviour is important ?
Unit Costing
Pricing
Decision Making
Budgeting
Break-even analysis
Transportation model Table A more compact method for representing the transportation model than the linear equations is to use what we call the transportation tableau. It is a
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How can we draw a break even chart Under this method the variable cost line is drawn first and then fixed cost line is drawn over and parallel to the variable cost line. The fi
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Definition of Cost reduction Cost reduction is planned positive approach to reducing expenditure. Cost reduction exercises are planned campaigns to cut expenditure. It is a con
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