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Explain the methods of separating semi-variable costs into their fixed and variable elements.

Open uri20170510 32134 tcchcu?1494421832 asked

**Explain the methods of separating semi-variable costs into their fixed and variable elements.**

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Hello, Semi Variable Fixed Cost is the cost which remain fixed for the particular level of units and after crossing the particular level of units it become variable. To Find Fixed cost and Varibale cost from the Semi Variable Use formula Change in Semi Variable Cost/ Change in the level of units. Then whatever rate you receive multiple it by the level of one unit and you will get the variable cost after that subtract the total varibale cost of that level with the Semi Varible cost of Same level and you will get the Fixed Cost. Hope you understand it.

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Open uri20170510 32134 ng4pv?1494421709 answered

**Three methods for separating Semi – Variable costs into their fixed and variable cost components:** 1. **Prepare a scatter graph by plotting points onto a graph: -** With this procedure, various costs are plotted on a vertical line, the y-axis, and measurement figures (activity levels such as direct labour hours, units of output, percentage of capacity or direct labour cost) are plotted along a horizontal line, the x-axis. A straight line is fitted to this scatter of points by visual approximation. The slope of the line is used to estimate the variable costs and the intercept of the line with the vertical axis is considered as the estimated fixed cost. 2. **High-low method : T**his approach considers the difference in total cost between two different volumes, and divides the incremental cost by the volume. The two levels of volume chosen are the highest and the lowest for the periods under review. The result of this division is the estimated variable cost per unit. 3. **Least Squares Regression Method:** The method of least squares uses the equation for a straight line: Y = a + bx, with a as the fixed element, and b the degree of variability.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Step I: Find out Variable cost per unit by following formula:- Change in semi variable cost/ Change in units Step II: Find Total Variable Cost by:- Multiply Variable cost per unit to the no.of units Step III: Find out Fixed Cost by:- Total Semi-Variable Cost - Total Variable cost IN STEP II U WILL GET VARIABLE COST AND IN STEP III U GET FIXED COST..

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