ACCT 323 Study Guide - Quiz Guide: Fixed Cost, Variable Cost, Cost Driver

• School: University of Calgary
• Department: Accounting
• Course: ACCT 323
• Professor: Anita Lakra

Document Summary

Cost structure: relative proportion of fixed, variable and mixed costs founds in an organization. Use activity analysis to determine which cost driver best explains how the cost behaves: Economic plausibility (it must make sense that x causes y) Reliability (the estimates derived by the cost equation must conform with actually observed costs) Varies in direct proportion to changes in activity level. Remains constant when expressed on a per unit basis. Per unit cost may change if activity levels are outside the relevant range. For example, it might decrease if supplier offers a quantity discount, or increase if company has to pay for express shipping of additional supplies. Activity base - a measure of whatever causes a variable cost to be incurred. Examples: direct labour-hours, machine hours, units produced, units sold, occupied beds in a hospital, amount of laundry processed in a hotel.