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AS Costs :explode: (Costs of production (Fixed, Variable, Indirect,…
AS Costs :explode:
Costs of production
Fixed
Variable
Indirect
Marginal
Direct
Limitations of break-even
Not all costs are classified as fixed or variable
No allowance made for inventory levels
Straight lines are unrealistic
Unlikely that fixed costs will remain unchanged
Output levels affecting costs
Variable costs
Marginal costs
Fixed costs
Break-even analysis includes :
Total costs
Sales revenue
Fixed costs
Problems in classifying costs
Not accurate with many different costs
Not all costs can connect to a cost center
Margin of safety
Amount by which the sales level exceeds the break-even level of output
Break even output level :
Fixed costs/ contribution per unit
Contribution per unit
Selling price - variable cost per unit