ACCT 2230 Chapter Notes - Chapter 3: Planning Horizon, Contribution Margin, Income Statement
27 Oct 2015
School
Department
Course
Professor
Document Summary
Total dollar amount varies in direct proportion to changes in the activity level: if the activity level doubles, the total dollar amount of the variable cost doubles. Variable cost remains constant if expressed on a per unit basis. Activity base: a measure of whatever causes a variable cost to be incurred: examples of common activity bases are direct labour hours, machine hours, units produced and units sold. You can assume, unless otherwise stated, that the activity base under consideration is the total volume of goods and services produced or sold by the organization. The number and type of variable cost present in an organization depends on the organizations structure and purpose. Large company like hydro one may have few variable costs. A manufacturing company like paradigm, often has many variable costs- these costs are associated with manufacturing and distributing its products.
