The best example out of the examples outlined above is the cost of electricity or energy which is of vital importance in manufacturing goods and providing services. The electricity expenses in an organisation are necessary not only to run the business smoothly but the main processes of production and services depend on continuous flow of electricity. A hospital providing medical services, care and facilities to various patients is a good example for analysis of semi variable cost behaviour.
The hospital requires electricity for lighting, heating and maintenance for day to day operations. There are variable costs of electricity in a hospital as well for operating several equipments such as X-ray machines, incubators, ventilators and several other equipments. The variable costs and fixed costs can be easily identified and recognised individually in the total costs of a company or processes in a company and for costs which include both variable and fixed elements the high and low point method can be applied to estimate the two components. The four most popular methods applied by companies for the purpose of cost separation are high and low point method, visual fit method, semi averages and regression (Cleverley and Cameron 2006).
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