ARBUS102 Lecture Notes - Lecture 16: Fixed Cost, Variable Cost, Behaviorism
20 Mar 2017
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Week 8 lecture 2: cost behaviour analysis and use. Variable costs in total variable costs changes as activity level change and variable cost per unit remains the same. Fixed costs total fixed cost remains the same even when the activity level changes. Fixed cost per unit goes down as activity level goes up. Step variable costs remain constant within a narrow range of activity, and then increase to a new higher cost for the next higher range of activity. Examples of normally variable costs cogs, supplies, travels, administrative salaries, sales commissions and shipping costs, direct material, direct labour, and variable manufacturing overhead. Examples of normally fixed costs property taxes, insurance, advertising depreciation, administrative salaries. Mixed costs: a mixed cost has both fixed and variable components, ex. A company takes tourists through a park that has a set licencing fee. Even if they don"t tour the park they still pay the licensing fee.
