22207 Study Guide - Final Guide: Variable Cost, Universal Rule, Regression Analysis
Document Summary
Understanding cost behaviours in organisations: nature and behaviour of fixed and variable costs. Cost behaviour = how costs and as activity and volume changes. Fixed = stay the same in total (aggregate costs) Vary when expressed on per unit basis (costs per unit as production ) Variable = vary in direct proportion to volume changes (always changing) Constant when expressed as per unit amounts (horizontal line) Relevant range = the vol. of production for which the fixed and variable cost relationships hold true (fc stay the same, vc per unit stays same) Rules of costing change outside the relevant range (line not straight) The cost equation: y = mx + b. Fixed cost = point that hits the y intercept (b) *economies of scales causes the slope to flatten (cid:455) = sh + (cid:454), For e(cid:448)ery o(cid:374)e-u(cid:374)it i(cid:374)(cid:272)rease (cid:894)de(cid:272)rease(cid:895) i(cid:374) produ(cid:272)tio(cid:374) (cid:894)(cid:454)), direct material (cid:272)osts i(cid:374)(cid:272)rease (cid:894)de(cid:272)rease(cid:895) (cid:271)y (cid:1004).
