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BUSI 1003 (12)
Chapter 11

Chapter 11

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BUSI 1003
Patti Proulx

Chapter 11 - Cost Behaviour and Cost Volume Profit Analysis ● Cost behaviour refers to the manner in which a cost changes as a related activity changes. Can be: ○ Variable ■ Costs that vary in proportion to changes in the activity level ○ Fixed ■ Costs that remain the same in total over the relevant range of activity, but change per unit with the level of activity ○ Mixed ■ Mixed costs share characteristics of both a variable and a fixed cost: fixed over a range, then increasing based on activity ○ Two factors to consider: ■ Activity bases –measure of whatever causes the incurrence of variable cost. Example: Direct Labour Hours, Machine Hours, Units Produced, Units Sold, km driven, # of sq.feet, # of text messages ■ Relevant range – range of activity of interest. ● Mixed Costs ○ Combination of fixed and variable costs
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