Cost Behaviour

Question: Explain why its important for approximately senior managers to have a sound knowledge of personify behaviour ie fixed monetary values, varying equals, semi-variable costs and sink costs. Answer: Understanding cost behaviour helps manager in anticipation of revisions in cost when there is a change in their activities like production, sales, inventory pile up and so forth It provides good assistance in planning, cost management and finding making. A number of behaviour patterns exist ranging from fixed to variable and from linear to curvilinear. M whatsoever cost predictions techniques ar used to foretaste sales and costs or any other factor. earnings planning has two main questions: (1) how much sales and (ii) what cost? First question can be answered by barely multiplying Quantity with Price. Second question is a bit unmanageable to answer as firstly (i) cost data would be analyzed to ascertain the cost-behaviour ( fixed, variable or semi variable), (iI) the cost behaviour would be reduced to mathematical formula for to each one cost item, and finally (iii) cost prediction would be make at X level of activity. FIXED COSTS Unlike varying costs, fixed costs do not change with any movement in some other activity.

For example, lease rental would be same whether a plant is operative or not, Similarly, salaries of permanent staff, depreciation on straight-line methods, plant insurance etc would retain the same irrespective of contentedness level or capacity utilization or production efficiency. Fixed costs are becoming more prevalent in many industries because of automation. modernistic technology enables a plant to reduce to a paltry amount and to use cheap materials.  A plant in Vietnam was successful using river-grass for the production of fine paper. It was later unlikable down due to paper dumping by some industrialized countries like China. Also, the automation is replacing direct jab with  engineers which are mostly permanent. Direct labour is gradually capture non-existent in capital... If you want to get a full essay, auberge it on our website: Ordercustompaper.com

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