ACCT1300
Activity Base
is a measure of whatever item causes a variable cost
Mixed Costs
is one that contains both variable and fixed cost elements
Cost Behaviour
refers to the way a cost reacts as changes take place in the level of business activity
Fixed portion
represents tha basic minimum cost of having a service/product ready and available for use
High Low
to analyze mixed cost using methods we have to begin by identifying the period with the lowest level of activity and the period with the highest level of activity.
4 steps of high low
1) calculate difference between high and low 2) find variable cost 3) find fixed cost 4) plug into equation y=a+bx 5) graph
Committed Costs
Fixed costs that relate to the investment in facilities, equipment, and basic organizational structure of the firm
True Variable Cost
These costs that vary in direct proportion to changes in the level of activity
Engineering Approach
a detailed analysis of cost behaviour based on an industrial engineers evaluation of the inputs that are required to carry out a particular activity and the prices of those inputs
Account Analysis
a method fir analysing cost behaviour which each account is classified as either variable or fixed on the basis of the analytics knowledge of how cost account behaves
Contribution Margin
an important use of seperating fixed and variable costs managers can use this information to complete contribution margin and prepare a contribution margin income statement
Step Variable Cost
Is a cost that increases or decreases only in response to more than a unit change in the activity level
Descrimetory Costs
Often referred to as a managed cost usually arise from annual decisions by management to spend money in a certian area
Fixed Costs
Remains constant in total dollar amount with in the relative range of activity
Variable portion
Represents the cost incurred for actual consumption of service/product. The variable elemalent varies in proportion to the amount of service/product consumed
Cost Structure
Significant impact on decisions with in a organization