COMM 112 Lecture Notes - Lecture 2: Fixed Cost, Income Statement, Cost Driver

• School: Queen's University
• Department: Commerce
• Course: COMM 112
• Professor: Kurt Schobel

Document Summary

Variable costs: remain constant on a per unit basis, total variable costs increase with each unit sold. Fixed costs: total fixed cost remains the same regardless of the level of output, fixed costs per unit decrease with each unit sold. Types of fixed cost: committed: long term, cannot be significantly reduced in the short term, ex. Depreciation on equipment, real estate taxes: discretionary: can be altered in the short term by current managerial decisions, ex. Step variable costs: step variable costs can be adjusted more quickly, the width (of volume) of the steps are much wider for a fixed cost. Mixed costs: a mixed cost has both fixed and variable components, ex. utility cost, y= mx+b, y = total cost, m = variable costs per unit. 2018-01-17: x = number of units sold, b = fixed cost. Example: (48000-8000) / (73000-0) = 40000/73000 = 0. 5479 $/unit y = 0. 5479 x + b.