GEO 509 Chapter Notes - Chapter 3: Liquid Oxygen, Cost Driver, Planning Horizon
28 Feb 2018
School
Department
Course
Professor
Document Summary
Cost behaviour: refers to how a cost will react or change as changes take place in the level of business activity. All three cost behaviour patterns variable, fixed, and mixed are found in most organizations. Cost structure: the relative proportion of each type of cost present in a firm. Variable costs: a cost whose total dollar amount varies in direct proportion to changes in the activity level. i. e. activity level doubles, vc doubles. Remains constant if expressed on a per unit basis i. e. cost of a hot chocolate for each customer remains constant at . 00. However, it is possible for vc"s to change based on the activity level once a given range is exceeded: vc drops below the per unit vc from before if large quantities are purchased quantity discounts. For a cost to be variable, it must be variable with respect to something.
