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Canada (162,227)
Accounting (248)
ACCT 2230 (113)
Chapter 6

Chapter 6 Managerial Accounting Chapter Notes

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Department
Accounting
Course
ACCT 2230
Professor
Elliot Currie
Semester
Fall

Description
Chapter 6 Accounting SummaryCost Behaviour AnalysisUseTypes of cost behaviour PatternsVariable CostsFor a cost to be variable it must be variable w respect to somethingactivity base cost driver Eg activityhours machine hours units produced etcTrue variable versus stepvariable costsTrue Variable costs direct materials is a true or proportionally variable cost bc the amount used during a period will vary in direct proportion to the level of production activity Can be stored as inventoryStepVariable Costs Stuff that cannot be stored as inventory such s maintenance hours A resource that is only available in large chunkswhose cost increasesdecreases only in response to fairly wide changes in activityThe Linearity Assumptionthe relevant range Normal variable costs showlinear relationship between costvolumeCurvilinear Costs A relationship between costactivity that is a curve rather than a straight lineRelevant Range The range of activity within which assumptions about variablefixed cost behaviour are validTypes of Fixed Costs Committed fixed costs Those fixed costs that are difficult to adjustthat relate to the investment in facilities equipmentbasic organizational structure of the firm Eg depreciation on buildingsequipment insurance expenses salaries of top management etcDiscretionary fixed costs those costs that arise from annual decisions by management to spend in certain fixed cost areas such as advertisingresearch These costs can be adjusted from year to yearThe trend towards fixed costs Chores that used to be done by hand are now done by machines As machines take
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