Flexed Budget Allowance refers to the budgeted expenditure level for each of the variable cost items adjusted to the level of activity actually achieved. This concept is crucial for adjusting budgetary figures based on actual performance.
A technique used for predicting cost behavior by analyzing the highest and lowest activity levels in a dataset to create a cost function. Though simple, it lacks mathematical rigor and precision.
A linear cost function captures cost behavior that, when plotted on a graph against activity levels, results in a straight line. This function simplifies the relationship between costs and activity levels, essential for cost estimation and budgeting in business.
A step-function cost refers to an item of expenditure where costs increase in a step-like pattern with rising activity levels. Unlike linear cost functions, step-function costs do not change continuously but incrementally at certain thresholds of activity.
An item of expenditure that increases in total as activity rises but in a stepped, rather than a linear, function.
A stepped cost, also known as a semi-fixed cost, is an expense that remains fixed over a certain level of activity or production but changes by a fixed amount when the activity level significantly increases or decreases beyond specific thresholds.
