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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
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Difficulties in cost reduction 1) Resistance by employees to pressure to reduce cost usually because the nature and purpose of the campaign has not been properly explained to t
Difference between managerial accounting and financial accounting are mentioned below Audience – Internal Vs External Format of Reporting – Free format Vs prescribed
reasons for favourable or adverse variances i.e. prise usage, mix, yeild
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How might a company use regression results to manage overhead costs?
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