Analysis of costs into fixed and variable elements and break-even point calculation

(a) ‘The analysis of total cost into its behavioural elements is essential for effective cost and management accounting.’

Required:

Comment on the statement above, illustrating your answer with examples of cost behaviour patterns.

(5 marks)

(b) The total costs incurred at various output levels, for a process operation in a factory, have been measured as follows:

Required:
Using the high-low method, analyse the costs of the process operation into fixed and variable components. (4 marks)

(c) Calculate, and comment upon, the break-even output level of the process operation in (b)
above, based upon the fixed and variable costs identified and assuming a selling price of £10.60 per unit.

Transcribed Image Text:

Output (units) Total cost () 11500 102476 12000 104 730 12.500 106263 13.000 108 021 13500 110727 14000 113 201