RSM222H1 Chapter Notes - Chapter 3: Income Statement, Variable Cost, Barcode
Document Summary
Cost structure: the relative proportion of fixed variable, and mixed costs found in an organization. Variable costs is one whose total dollar amount varies in direct proportion to changes in the activity level. This means that if the activity level doubles, the total dollar amount of the variable costs also doubles. If the activity level increases by only 10%, then the total dollar amount of the variable costs increases by 10% as well, and so on. It will remain constant if expressed on a per unit basis. Activity base: it is a measure of whatever causes a variable cost to be incurred. For example, the total cost of direct materials in a bicycle manufacturing company will increase as the number of bicycles produced increases. Therefore, the number of bicycles produced is an activity base for explaining the total cost of direct materials.
