ACC 406 Lecture Notes - Lecture 3: Squared Deviations From The Mean, Cost Driver, Fixed Cost

• School: Ryerson University
• Department: Accounting
• Course: ACC 406
• Professor: Keith Whelan

Document Summary

Intro to managerial accounting; cost behaviour (chapter 3) Costs can be variable, fixed, or mixed. Knowing how costs change as output changes is essential for managers in planning, controlling, and decision making. Cost behaviour is the general term to describe whether a cost changes when the level of activity changes. A fixed cost is a cost that does not change in total as activity changes. A variable cost increases in total with an increase in activity and decreases in total with a decrease in activity. Cost behaviour measures of output cost driver. A cost driver is a key determinant of cost behaviour. A cost driver is a causal measurement that causes costs to change. A cost is fixed or variable with respect to some output measure or cost driver. First we determine the underlying business activity and ask ourselves, what causes the cost of this particular activity to go up or down? .