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Determine the cost according to normality
According to normality: under this category cost may be categorized as follows:
Normal cost: it is the cost which is normally incurred at a given level of the output in the condition in which that level of the output is attained. It is charged to costing profit and loss account.
Abnormal cost: it is the cost which is not normally incurred at a given level of the output in the condition in which that level of the output is attained. It is charged to costing profit and loss account.
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It is the most practical way of estimating working capital needs. In such method, the finance manager gets ready a working capital forecast. While preparing such forecast, firstly
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EOQ mathematical model As costs of ordering and holding stock are equal at the EOQ point, we can build a simple mathematical model to solve the problem, as follows: (Q/ 2) X
companyXYZusesthe job oder costing system.
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