# Cost behaviour and break-even analysis

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• Created by: josief95
• Created on: 13-12-15 13:37

## 1. Irrelevant cost examples:

• Sunk / Expired / Historic cost; a cost that will be avoided by the company
• Sunk / Expired / Historic cost; a cost that doesn't require the decision of management
• Sunk / Expired / Historic cost; a cost that will not impact the company
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## 2. Break-even point (BEP):

• Variable Cost / Contribution per unit (Contribution per unit = Variable costs per unit + Sales revenue per unit)
• Fixed cost / Contribution per unit (Contribution per unit = Sales revenue per unit − Variable costs per unit)
• Fixed cost / Contribution per unit (Contribution per unit = Variable costs per unit + Sales revenue per unit)

## 3. Semi-Variable Cost or Semi-Fixed Cost

• Vary according to the volume of activity
• It is a mixture of fixed and variable cost
• Remain constant (fixed) when changes occur to the volume of activity then changes

## 4. Minimum price a business should charge for a lorry (£10,000) fitted with new engine (£2500) which could be sold immediately for (£9,000)

• Opportunity cost + Engine cost
• Historic cost (£10'000) + Engine cost (£2500)
• Historic cost (£10'000) + Engine cost (£2500) - Opportunity cost

## 5. BEP = [Total sales revenue =

• Total cost]
• Total cost - Variable cost]
• Total cost + Variable cost]
• Total cost - Fixed cost]