Question

1. What is a learning curve, and what does it measures?

2. What is experience curve and how does it relates to cost per unit?

3. What are the fundamental different between absorption and marginal costing? Who are the users of both?

4. If an unprofitable segment is eliminated, what will happen to the allocated fixed cost?

5. Under high-low method, the denominator of the equation that determines the slope is?

Answer 1

Answer for 1)

Learning curve say that what organisation learned from the mistakes that they did while creation of a goods or services. It measures that what the cost reduced through learning.

Answer for 2)

Experience curve explains the effect of reduced cost due to gain in experience in a particular activity.It relates to unit cost as it shows what is the cost reduced due to gain Experience in a particular field which helps in comparing the unit cost before gain experience and after implementing such details which learned through experience.

Answer for 3)

The fundamental difference between absorption costing and maginal costing is marginal costing considers variable costs as product costs and fixed costs as periodic costs for determining costs incurred for manufacturing a unit which is used by internal people for decision making where as absorption costing sees both costs as product cost for determining the net profit which is used by external people to find the performance.

Answer for 4)

The fixed costs which are avoidable are avoided like depreciation of machinery which have no use will be sold etc The unavoidable depreciation will be redistributed to other segments on the basis determined by management or to the new segment which is started in that place and uses all it's resources.

Answer for 5)

As the name indicated the high and low observations of such particular cost driver.