ACCT 2230 Chapter : Managerial Accounting Chapter Six Notes
Document Summary
Chapter 6- cost behaviour: analysis and use y cost behaviour refers to how a cost will react or change as changes take place in the level of business activity. y we have only mentioned variable and fixed costs. a variable cost is a cost whose total dollar amount varies in direct proportion to changes in the activity level. Direct proportion signifies that if the activity level doubles, the total dollar amount of the variable costs also doubles. a variable cost remains constant if expressed on a per unit basis. the idea that a variable cost is constant per unit but varies in total with the activity level is crucial to an understanding of cost behaviour patterns. the activity base y activity base is a measure of whatever causes the incurrence of a variable cost. For example, the total cost of x-ray film in a hospital will increase as the number of x-rays taken increases.