ACCT 2550 Chapter Notes - Chapter 2: Income Statement, Perpetual Inventory, Sunk Costs
4 Oct 2016
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Document Summary
Enables a manager to better understand costs. Managers often need to understand how costs will behave in response to changes in activity level. Useful for cost estimation, planning, and cost profitability analysis. Cost behaviour is the way a cost will respond to changes in the level of an organization"s business activity. Variable cost: a cost that changes in direct proportion to fluctuations in the level of activity, constant when expressed on a per-unit basis. A cost object is anything for which cost data are desired department, division, product, product line, customer, or geographical territory. Direct cost: pertains to a certain cost object and can be easily and economically traced to that cost object. Indirect cost: a cost that cannot be easily and conveniently traced to a particular cost object under consideration, incurred to support a number of cost objects but cannot be traced to individual cost objects.
