Cost structure- The relative proportion of fixed, variable, and mixed costs found in an organization.
Activity base- A measure of whatever causes the incurrence of a variable cost. For example, the total cost of X-
ray film in a hospital will increase as the number of X-rays taken increases. Therefore, the number of X-rays is
an activity base for explaining the total cost of X-ray film. (a.k.a cost driver)
Step-Variable cost- A cost (such as the cost of a maintenance worker) that is obtainable only in large chunks
and that increases and decreases only in response to fairly wide changes in the activity level.
Curvilinear costs-A relationship between cost and activity that is a curve rather than a straight line.
The relevant range is that range of activity within which the assumptions made about cost behavior
Committed fixed costs-Those fixed costs that are difficult to adjust and that relate to the investment in
facilities, equipment, and the basic organizational structure of a firm.
Discretionary fixed costs- Those fixed costs that arise from annual decisions by management to spend in
certain fixed cost areas, such as advertising and research.
Key difference between committed and discretionary fixed costs are: discretionary is for short term
and can be cut without much impact on the organization.
In summary, we cannot provide a clear-cut answer to the question “Is labour a variable or fixed cost?”
The fixed portion of a mixed cost represents the basic minimum cost of just having a service ready