NUTR 343 Lecture Notes - Lecture 7: Contribution Margin, Earnings Before Interest And Taxes, Fixed Cost
14 May 2016
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Document Summary
Cost volume profit analysis and capital investment decision. You don"t need to know how to transform an income statement into a contribution margin statement. Variable costs: variable costs are those costs that vary depending on a company"s production volume; they rise as production increases and fall as production decreases. Variable costs differ from fixed costs such as rent, advertising, insurance and office supplies, which tend to remain the same regardless of production output. Fixed costs: expenses that do not change as a function of the activity of a business, within the relevant period. Mixed costs: the term mixed costs often refers to the behavior of costs and expenses. Mixed costs consist of a fixed component and a variable component. Relevant range: the relevant range refers to a specific activity level that is bounded by a minimum and maximum amount. Within the designated boundaries, certain revenue or cost levels can be expected to occur.
