ACTG 2020 Lecture Notes - Lecture 2: Cost Driver, Scatter Plot, Fixed Cost
Document Summary
Total variable cost: change proportionally with activity levels. Total fixed cost: do not vary with small changes in activity levels. Mixed costs: part fixed part mixed. (the photocopier leasing: another example is utility cost like electricity. Flat fee plus a variable rate per kwh used: mixed cost curve has equation y =mx + b; y is total mixed cost, m is variable cost per unit, b is fixed cost, x is level of activity. Total costs: total variable + total fixed. Costs that are fixed at different amounts for different levels of output. Is a casual measurement that causes costs to change. Range of output over which an assumed cost relationship is valid. Advertising: depends on mgmts decision on what sort of advertising they pick. Used to algebraically represent the total cost of a cost object over a range of activity. Tc = f + vq or y = b + mx. Use past costs to estimate future committed costs.
