Finance and funding in travel and tourism sector - Assignment Example

Download file to see previous pages... Such costs are therefore apportioned on the basis of any formula or any other mechanism. Such costs include administrative costs like janitorial services, utilities etc.
Fixed Costs: These costs remain constant irrespective of the level of the activity. For instance, the machinery fuel consumption; this will not be reduced or increased with the level of production. Rather, the fuel expenses will be distributed over the units produced. Therefore, it is the behaviour of the fixed costs that they remain fixed in totality but reduce per unit as the production increases.
Variable costs: Variable costs are such costs, which increase or decrease with respect to the level of the activity. For example, the labour cost for the production of the units of product will be nil in case the production halts and will be increased when the production starts. Such costs behave parallel to the level of the activity.
Semi-variable costs: Semi-variable costs are such costs which consist of the features of variable costs also and that of the fixed costs. It implies that such costs are fixed up to a certain extent and then they get parallel to the level of the activity.
Cost volumes are significant in decision-making process of the management. Things get managed when they get measured; this is the main reason why costs volumes are always monitored. Constraints are established for the costs levels so that they do not exceed the prescribed budget. Costs volumes analysis sets the direction for the controls to be applied on different components of the variable costs. In addition to this, once the cost volumes are established, they can be then compared with the costs of prior periods, competitors and other departments by way of benchmarking. Comparison with prior period assists in comparisons and variance analysis with respect to the previous years. The results of the previous year are ...Download file to see next pagesRead More