ACCY 201 Lecture Notes - Lecture 1: Fixed Cost, Variable Cost, Financial Plan

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Used by internal and external decision makers in the company. Three functions: helps entrepreneur visualize the business and its operations. What drives revenues and cost up or down. Activity driver: activity that is assumed to cause changes in revenues or cost. Such as installation of xxx next to xxx will cause revenue to increase. Behavior pattern: relationship between x (activity) and y (cost or revenue) Relevant range: normal range of activity, span of activity that has a minimum and a maximum activity level. Variable costs and variable revenues change in cost and revenue, proportionally related to amount of activity (example number of products sold) Total cost and revenue increases per unit of activity (sold) Rent, machine) and business revenues that are constant, regardless of how much goods or service is produced. Combination of fixed and variable costs and revenues. Profit = q(p-vc) fc or (q x p) (q x vc) -fc.

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