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Cost-Volume-Profit assumptions
The main assumptions required in C-V-P analysis are:
1) The relationship holds merely within the appropriate range. The relevant range is a band of activity in which a specified cost behavior is stated.2) The behavior of net cost and net revenue has consistently been determined and is lineal in the relevant range.3) All costs can be splitted into fixed and variable such that mixed costs are decomposed into their fixed and their variable components.4) Selling prices are constant hence we avoid quantity discounts.5) Efficiency and production stay similar therefore we ignore the learning curve effect.6) The prices of factors of production stay constant.7) There are no limiting factors
Parameter prediction error: This is another aspect of faulty planning. As Hongren says, ‘planning decisions are based on predictions of future costs, future selling price, fut
Explain with examples five areas where linear programming can be applied in Managerial accounting
static budget
Cost-volume relationship utilization Cost-volume-profit study is an estimating concept which can be employed in a variety of pricing circumstances. You can employ the cost-volu
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Cost driver analysis Cost drivers are factors, which determine the costs of an activity i.e. a change in the cost driver will cause a change in the level of total cost relate
ABM(Activity based management): ABM system is primary source of information for AM as a part of ABM identify value added and non-value added activity and management are also to
What are the duties of the Public Company Accounting Oversight Board?
underlying assumptions of breakeven analysis and the limitations of this.
Determine Cost pool and Cost drivers Cost pool: it is another name given to a cost centre and, therefore an activity cost centre may also be termed as an activity cost pool.
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