Describe the Three Methods Used to Determine Cost Behaviour

question 140

Essay

Describe the three methods used to determine cost behaviour.

Comprehend the principles and application of ABC analysis in inventory classification.

Recognize the challenges and strategies in controlling service inventories.

Understand the relationship between service level and stockouts.

Grasp the criteria for classifying inventory into ABC categories based on annual dollar volume or demand.

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Definitions:

Marginal Utility

The additional satisfaction or utility a consumer gets from consuming one more unit of a good or service.

Total Utility

The total satisfaction received from consuming a particular quantity of a good or service.

Budget Line

A graphical representation of all possible combinations of two goods that a consumer can purchase with a given income and prices of the goods.

Money Income

This term describes the total earnings received by an individual or household, including wages, salaries, and other forms of monetary income.