(a) In economics, variable costs are often described as curvilinear whereas within cost accounting it is uaualto assume variable costs have a linear function.

You are required to sketch two separate diagrams depicting:

(i) a curvilinear variable cost;

(ii) a linear variable cost.

(b) Explain and show by drawing two separate diagrams what is meant by:

(i) a semi-variable cost;

(ii) a stepped fixed cost;

and give one example of each.

(c) (i) Explain a method of depreciating an asset where the depreciation is not regarded as a fixed cost. Give the names of two common kinds of assets which may suitably be depreciated by the method you have stated.

(ii) You are required, ignonng inftation, to comment on the following statement and state whether or not you agree withil.

A business owning an asset with an estimated life of five years makes an annual provision for depreciation which is one fifth of the purchase price of the asset.

Provided the asset lasts for exactly five years the business will, by making the depreciation entries, ensure that sufficient cash is available to replace the asset