ACBU 2223 Lecture Notes - Lecture 2: Opportunity Cost, Variable Cost, Sunk Costs

• School: Fordham University
• Department: Accounting
• Course: ACBU 2223
• Professor: John Savignano

Document Summary

Nonmanufacturing costs: selling costs: costs necessary to secure order & deliver product (can be direct/indirect costs, administrative costs: all executive, organizational, & clerical costs (can be direct/indirect) Types of cost classifications: financial reporting. Product costs direct materials, direct labor, & manufacturing overhead. Period costs selling costs & administrative costs: predicting cost behavior. Cost behavior refers to how a cost will react to changes in the level of activity w/ most common classifications being variable costs, fixed costs, & mixed costs. Variable costs: cost increase and decrease in proportion to changes in the activity level w/ variable cost per unit remaining constant: activity base (cost driver) measure of what causes incurrence of variable cost. Fixed costs: cost that remains constant, in total, regardless of changes in the level of the activity: fixed cost per unit decreases as the activity level rises and increases as the activity level falls, types. Committed long-term & can"t be significantly reduced in short term.