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