ALGEBRAIC ANALYSIS
The supposition of linear cost behavior allows use of straight-line graphs and simple linear algebra in cost-volume study.The net cost is a semi-variable cost—few of the costs are fixed, a number of costs are variable, and others are semi-variable. In study, the fixed component of a semi-variable cost can be treated similar to any other fixed cost. The variable component can be treated similar to any other variable cost. As an outcome, we can state that:Total Cost = Fixed Cost + Variable Cost By using symbols: C = F + VHere:C = Total costF = Fixed costV = Variable costNet variable cost based on two elements:Variable Cost = Variable Cost per Unit x Volume Produced By using symbols:V = Vu (Q)Here:VU = Variable cost per unitQ = Quantity (volume) producedReplacing this variable cost information into the fundamental total cost equation, we have the equation employed in cost-volume study:C = F + VU (Q)