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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
Explain the techniques of performance budgeting It will also be useful to examine the three major aspects of this technique: Structural aspects : the structural aspects inv
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limitation
Problem Marginal costing plays a major role in making certain decisions. It provides information to management regarding the behaviour of costs and the incidence of such costs
What does compounding technique shows?
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