ADMS 1500 Lecture Notes - Activity-Based Costing, Contribution Margin, Fixed Cost

104 views2 pages

blackcrocodile597

16 Oct 2011

School

York University

Department

Administrative Studies

Course

ADMS 1500

Professor

Marcela Porporato

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Cost behaviour: describes the relationship between cost & different activity levels variable, fixed, and mixed. Fixed costs: constant at all predetermined activities (eg: rent, heating, property tax, & management salaries); are still incurred as expense. Mixed costs: costs that do not fall into either category because they are made up of a fixed element and a variable element (electricity, cars) The break-even model: relationship between costs & revenues to determine the operating income at any level of activity; useful planning & decision support tool. Contribution margin: difference between selling price & variable cost; measures how much better off the company is as a result of the sale of one additional unit. Activity above break-even point: every unit sold above break-even point, contribution margin is pure profit; the greater the number sold, higher the profit becomes. Using the break-even model to analyze changes: used to evaluate wide range of decisions. Unit-variable costs: change with the number of units sold or produced.

Related Questions

Cost Behavior and Operating Income

posted Nov 28, 2016, 4:07 AM

Variable costs are directly proportionate to the level ofproduction activity for the period. So if your units produceincrease, then your variable costs will increase. Fixed costsremain constant over a wide range of production activity so nomatter what your amount of production, your fixed cost remains thesame. Semi-variable costs have a fixed element and a variableelement. Your utility bill would be a good example of that cost.How do you first, figure out how to separate fixed vs variablecosts in semi-variable costs to allocate to jobs? AND I'm going tostretch you...what are stepped fixed costs?

emeraldeel675

1. Which one of the following refers to a cost that remains the same as the volume of activity decreases within the relevant range?

A. Average cost per unit.

B. Variable cost per unit.

C. Unit fixed cost.

D. Total variable cost.

2. The relevant range refers to the activity levels over which

A. Cost relationships hold constant.

B. Costs fluctuate.

C. Production varies.

D. Relevant costs are incurred.

3. When identifying fixed and variable costs, which one of the following is a typical assumption concerning cost behavior?

A. General and administrative costs are assumed to be variable costs.

B. Cost behavior is assumed to be realistic for all levels of activity from zero to maximum capacity.

C. Total costs are assumed to be linear when plotted on a graph.

D. The relevant time period is assumed to be 5 years.

4. A management accountant is about to prepare graphs of total variable cost and per-unit variable cost for use in a short-term planning model. Dollars will be depicted on the vertical axis; activity will be shown on the horizontal axis. How will these graphs appear under completion?

Total Variable Cost; Per-Unit Variable Cost

A. Straight line, sloping upward to the right; Straight line, parallel to the horizontal axis

B. Curvilinear, sloping upward to the right; A line that basically parallels the horizontal axis, first decreasing and then increasing

C. Straight line, sloping upward to the right; Straight line, sloping upward to the right

D. Straight line, parallel to the horizontal axis; Straight line, sloping upward to the right

5. A company has found that its total electricity cost has both a fixed component and a variable component within the relevant range. The variable component seems to vary directly with the number of units produced. Which one of the following statements concerning electricity cost is incorrect?

A. The total electricity cost will increase as production volume increases.

B. The total electricity cost per unit of production will increase as production volume increases.

C. The variable electricity cost per unit of production will remain constant as production volume increases.

D. The fixed electricity cost per unit of production will decline as production volume increases.

silversnake284

Match the items in the two columns below by entering theappropriate code letter in the space provided.

The amount of revenue remaining after deducting variablecosts.
Costs that contain both a variable and a fixed element.
The percentage of sales dollars available to cover fixed costsand produce income.
Identifies the activity which causes changes in the behavior ofcosts.
The difference between actual or expected sales and sales atthe break-even point.
Costs that vary in total directly and proportionately withchanges in the activity level.
The level of activity at which total revenues equal totalcosts.
The range over which the company expects to operate during theyear.
Costs that remain the same in total regardless of changes inthe activity level.
A costing approach in which all manufacturing costs are chargedto the product.
A method that uses the total costs incurred at the high and lowlevels of activity.
A costing approach in which only variable manufacturing costsare product costs and fixed manufacturing costs are period costs(expenses).

1.	Activity index
2.	Variable costs
3.	Fixed costs
4.	High-low method
5.	Relevant range
6.	Mixed costs
7.	Break-even point
8.	Contribution margin
9.	Variable costing
10.	Absorption costing

orangetermite875

ADMS 1500 Lecture Notes - Activity-Based Costing, Contribution Margin, Fixed Cost

Document Summary

Get access

Related Documents

ADMS 1500 Lecture Notes - Lecture 2: Behaviorism, Sandpaper, Balance Sheet

ADMS 1500 Lecture Notes - Environmental Full-Cost Accounting, Contribution Margin, Sunk Costs

ADMS 1500 Chapter Notes - Chapter 2: Behaviorism, Finished Good, Fixed Cost

Related Questions