ADM 2341 Lecture Notes - Lecture 3: Kilowatt Hour, Watt, Income Statement

• School: University of Ottawa
• Department: Administration
• Course: ADM 2341
• Professor: Lamia Chourou

Document Summary

Direct materials is a true or proportionately variable cost because the amount used during a period will vary in direct proportion to the level of production activity. A variable cost is a cost whose total dollar amount varies in direct proportion to changes in the activity level. Your total long-distance telephone bill is based on how many minutes you talk. A variable cost remains constant if expressed on a per unit basis. The proportion of variable costs differs across organization. A resource that is obtainable only in large chunks (such as maintenance workers) and whose costs increase or decrease only in response to fairly wide changes in activity is known as a step-variable cost. A fixed cost is a cost whose total dollar amount remains constant as the activity level changes. Your monthly basic telephone bill is probably fixed and does not change when you make more local calls. Average fixed costs per unit decrease as the activity level increases.