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Lecture

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Chapter 3 - Cost Behaviour

Cost Behaviour is the relationship between cost and the activity volume.

Variable Cost + Fixed Cost = Total Cost

•High-low Method

1.Find Highest and Lowest point

2.Variable cost per unit > V= YH – YL / XH - XL

3.Fixed cost > F = Y-(V)(X) [Either use High or Low]

4.Y = F – (V)(x)

•Scatter plot Method

•Method of least Squares

.:. Estimate the cost function/equation/formula

Total Cost = Ttl Fixed Cost + (Variable Cost per unit)(Activity Volume)

Y = F + (v)(x)

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