AFM102 Lecture Notes - Lecture 6: Fixed Cost, Variable Cost, Income Statement

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM102
• Professor: Catherine Wong

Document Summary

Variable costs: activity base measure of whatever causes the incurrence of a variable cost, variable cost increases proportional to activity, variable cost is constant per unit of activity. Fixed costs: total fixed cost is always constant, per unit fixed cost decreases when more productivity, but average fixed cost becomes progressively smaller as the level of activity increases. Analysis of mixed costs: fixed portion is usually to have a service ready and available for use, variable portion is usually the cost incurred for actual consumption. The high-low method: method of separating a mixed cost into its fixed and variable elements by analyzing the change in cost between the high and low levels of activity, variablecost = It generally cumulates in a cash budget, a budgeted income statement, and a budgeted balance sheet. Budgets" dual role: planning and control: budgets serve as planning and control tools in organization.