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Cost Classification and Behaviour (part 2) – CIMA P1
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I got a little confused with the illustration the lecturer gave about powering machines being a variable cost when discussing Semi variable costs. Here is why…
Most productions are batched and not necessarily done per unit. And the batch is assumed to need as much power as a single unit would generally, so I wondered why that could not be classified as a stepped cost instead of a variable
Can someone unravel that for me please, thanks
If produced in batches then indeed it would be a stepped cost. However it is not the case that most productions are batched – for example, car production is not done in batches. It there is batch production then an exam question would make this clear.
what would be the stepped fixed cost per unit?
very thorough and helpful lecture.