Writing a Formula for Each Secondary or Tertiary Cost
A useful hint in writing an algebraic formula for a cost element is to remember that all cost elements, by definition, should be measured in currency over a specific period. So, if the LHS is to equal the RHS, then the formula has to eventually be:
If the formula was for direct labor, the first step would be to expand the RHS so that:
See how the hours cancel out to leave the RHS the same as the LHS? The secret, therefore, is to remember that the numerator of the next variable should be ...
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