Cost behaviour, Managerial Accounting

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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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