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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
5
Why might managers favour this ABC system instead of the older system that allocated all MOH costs on the basis of direct? labour?
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Differnetial cost analysis uses
full explaination with diagram
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ALGEBRAIC ANALYSIS The supposition of linear cost behavior allows use of straight-line graphs and simple linear algebra in cost-volume study. The net cost is a semi-variable c
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