ACC 100 Lecture Notes - Lecture 3: Cost Driver, Fixed Cost, Variable Cost

• School: Ryerson University
• Department: Accounting
• Course: ACC 100
• Professor: Richard Deklerk

Document Summary

Knowing how costs change as output changes is essential for managers in planning, controlling, and decision making. Cost behavior the general term to describe whether a cost changes when the level of activity changes. Fixed cost does not change in total when an activity changes. Variable cost increases in total with an increase in activity and decreases in total with a decrease in activity. Cost behavior- measures of output cost driver cost driver key determinant of cost behaviour, the casual measurement that causes cost to change, an output measure. What causes the cost of this particular activity to go up? . Discretionary fixed costs - fixed costs that can be changed relatively easily at management i. e. advertising. Committed fixed costs fixed costs that cannot be easily changed; these often involve a long term contract. Total variable cost = variable rate (variable cost per unit) x amount of output. Mixed costs costs that have both a fixed and a variable component.