ACCT 2230 Lecture Notes - Lecture 2: Income Statement, Variable Cost, Fixed Cost
Document Summary
Activity base: a measure of what causes the incurrence of a variable cost. Level of activity of the company is changing over time. Variable costs change when the activity level changes. Xed costs have nothing to do with the level of activity (fixed cost per unit change with the level of activity) Average xed costs per unit decrease as activity level increases. Mixed costs is a combination of variable and mixed costs. The xed costs portion is the minimum amount you have to pay (ex. total utility cost has a monthly charge, which is the xed cost. Plus you get charged as you use the utility, which is the variable cost) > y = a + bx is the equation used to describe mixed costs. The contribution format (new form of the income statement) Separates costs into xed and variable elements in order to make decisions. Contribution margin covers xed costs and provides for income.
