Cost behaviour and break-even analysis

HideShow resource information

1. Variable Cost

  • It is a mixture of fixed and variable cost
  • Vary according to the volume of activity
  • Remain constant (fixed) when changes occur to the volume of activity
1 of 19

Other questions in this quiz

2. Margin of Safety:

  • It is the excess of planned volume (equity) of activity compared to the depreciation of (Capital) at Break-even Point
  • It is the excess of planned volume (sales revenue) of activity over volume (sale revenue) at Break-even Point
  • It is the excess of planned volume (equity) of activity over volume (Capital) at Break-even Point

3. BEP = [Total sales revenue =

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

4. Weaknesses of break-even analysis:

  • Linear relationships, flat rate fixed costs, Multi-product businesses
  • Non-linear relationships, Stepped fixed costs, Multi-product businesses
  • Linear relationships, curved fixed costs, Multi-product businesses

5. 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

Comments

No comments have yet been made

Similar Accounting resources:

See all Accounting resources »See all Cost behaviour and break-even analysis resources »