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Determining how cost will change with output or other measurable factors of activity is of vital importance for decision-making, planning and control and this involves
Determining how cost will change with output or other measurable factors of activity is of vital importance for decision-making, planning and control and this involves distinguishing between fixed and variable costs at differently activity levels. The sales manager who attended the seminar was shown the following cost volume graphs: (i) (ii) B Er The production manager who also attended the seminar was provided the following cost data for different levels of activity by the finance department. February March Activity levels (units) 25,000 40,000 RM RM Direct materials 157,500 252,000 Direct wages 225,000 360,000 143,000 Production overheads Selling overheads Total costs 188,000 111,000 78,000 603,500 911,000 Required: a) Identify the cost behaviour of the three different graphs shown above by describing and providing an example for each type of cost. (6 marks)
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