Page 91 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting

Notes Table 6.1: Statement of Fixed, Variable and Total Costs and Per Unit

S.No. Units Fixed Fixed Cost Variable Variable Cost Marginal Cost Total
Cost (`) per unit (`) Cost (`) per unit (`) (`) ΔC/ΔU Cost (`)
1. 1 500 500 10 10 10 510
2. 50 500 100 500 10 10 1000
3. 100 500 5 1000 10 10 1500
4. 150 500 3.333 1500 10 10 2000

Fixed Cost: It is a cost remains constant or fixed irrespective level of production.

Example: Rent ` 5,00/- is to be paid irrespective level of production. It remains constant/

fixed irrespective of changes taken place on the level of production.
Figure 6.1

Y’

Total Fixed Cost Line

Fixed Cost per unit Line

X’

X’- Units Y’- Cost in Rupees

Variable cost: It is a cost, which varies with level of production.

Figure 6.2
Variable Cost

Variable Cost per unit

X’ - Units Y’ - Cost in Rupees
The following are the various components of variable cost:
1. Direct Materials: Materials cost consumed for the production of goods.
2. Direct Labour: Wages paid to the labourers who directly involved in the production of
goods.
3. Direct Expenses: Other expenses directly involved in the production stream.

4. Variable portion of Overheads: Generally the overheads can be classified into two
categories, viz. Variable overheads and Fixed overheads.
The variable overheads is the cost involved in the procurement of indirect materials, indirect
labour and indirect expenses.

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