Basic Costing
Homework
Recap
Basic Costing
Lesson 3 Chapter 3
Cost behaviour
ObjectivesExplain fixed, variable, semi-variable and
stepped behaviour costs.
Distinguish between fixed, variable, semi-variable overheads
Identify the types of cost and profit centres.
Cost BehavioursFixed costs
Variable costs
Semi–variable or Semi-fixed costs
Stepped costs
Fixed Expenses
Do not change with changing levels of production
EXAMPLES:Rent and ratesCleaner’s wages
What would a fixed cost look like on a graphTotal cost
Output Units
Fixed costs - Answer
Would it look different for fixed cost per unit?
Cost p/unit
Output Units
Fixed costs per unit - Answer
Variable Costs
Vary directly with changes in levels of production
EXAMPLES:MaterialLabour
What would a variable cost look like on a graph?
Total cost
Output Units
Variable cost - Answer
Would it look different for variable cost per unit?
Cost p/unit
Output Units
Variable cost per unit - AnswerCost p/unit
Output Units
Semi-fixed, Semi-VariablePart of cost remains fixed at any production
level
Part of cost changes with changing production levels
EXAMPLES:Power, telephoneProduction workers wages (standard wage+
bonus)
What would a semi-variable/fixed cost look like on a graph?
Total cost
Output Units
Semi-variable/fixed - Answer
Stepped Fixed over a particular rangeAbove this range steps up
Examples include ratio of supervisors to operatorsNumber of machines being used
What would a stepped cost look like on a graph?
Total cost
Output Units
Answer
Cost CentresCost / Expense
Section of a business costs can be chargedDepartment, branch i.e. PRODUCTION COST
CENTRE
ProfitBoth costs and income directly related to it
Investment
RecapTypes of cost behaviour
Graphical representation of costs
Cost centres
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