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Evaluation

Evaluation  ‘I fie Plinths value method including the NPV variation possesses several merits, TIle first. and probably the most significant, advantage is that it explicitly recognizes the time value of money. In Example 10.6, for instance (Table 10.1.4). the...

Modified Flexible Budgets

Modified Flexible Budgets From the preceding discussion it should be clear that flexible budget as a tool of planning and control are superior to fixed budgets. The major weaknesses of state budgets are their inability to: (i) Disclose the potential variability of...

Mixed Costs

Mixed Costs The mixed cost, are composed of both fixed and variable elements. The fixed part of represents a cost of capacity, while the variable elements is influenced by change in activity. For budgeting purposes, mixed costs must be broken down into their fixed...

Cost Behaviour with Change in Volume

Cost Behaviour with Change in Volume Three different types of cost behavior can be visualized with changes in volume/level of activity. (i) Fixed costs, (ii) Variable costs, and (iii) Mixed costs. FIXED Costs The fixed costs are associated with inputs that do not...

Measure of Volume

Measure of Volume The volume measure selected for any given department/firm should be that quantity which displays the greatest degree of correlation with those costs that vary with the level -of operating activity. Different departments may use different measures of...

Flexible Budgets

Flexible Budgets The discussion of the master budget and its components in the preceding section was based on the assumption of fixed level of activity. In other words, the budgets were related to a specific level of operation implying thereby that a firm can...