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| Cost Patterns |
Normally for an increase in the level of activity, there is a uniform increase in cost. This assumption that a linear relationship exists between activity and cost is made by the accountant. But is it always valid? The economist would disagree with the accountant’s viewpoint maintaining that it is not linear relationship that exists, but rather what he refers to as a curvi-linear relationship. This can be illustrated in relation to two major variable costs: Direct material and Direct labour.
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