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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
VALUE ADDED STATEMENTS Are intended to show how much wealth or value has been created by the company’s operations and how the wealth has been shared out to interested groups e.
implications of applying accounting concepts wrongly
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