y = a + bx
Where:
‘a’ – the intercept, i.e. the value of y when x = 0
‘b’ – the gradient of the line y = a +bx (the change in y when x increases by one unit)
‘x’ - the independent variable
‘y’ – the dependent variable
The point at which the line crosses the y-axis is the intercept.
‘a’ is the fixed cost per period (FC)
‘b’ is the variable cost per unit (VC/unit)
‘x’ is the activity level (output)
‘y’ is the total cost TC = fixed cost + variable cost
On a graph of a semi-variable cost the intercept shows the fixed element and the gradient gives the variable cost per unit.