ARBUS102 Chapter Notes - Chapter 2: A Question Of Balance, Income Statement, Financial Statement
7 Mar 2016
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Costs are incurred by all kids of organizations: governments, hospitals, educational institutions, and merchandising, service, and manufacturing companies. The cost incurred may be one time or recurring and may differ depending on need. Costs can be classified using four broad categories: behaviour, traceability, relevance, function. All three activities of managers involve dealing with cost information by way of estimation, analysis, and reporting. Enables a manager to better understand the costs. Managers often need to understand how costs will behave in response to changes in: this knowledge is useful for cost estimation, planning, and cost profitability, ex. A manager of air canada may want to estimate the impact of a 10% increase analysis in the number of passengers will result in a proportionate increase in catering costs. For planning purposes, a manager must be able to estimate how different costs will behave with respect to changes in business activity: classifying costs as variables or fixed helps a manager make such predictions.
