Business Administration 2257 Chapter Notes - Chapter 2: Cash Flow, Weighted Arithmetic Mean, Contribution Margin

• School: Western University
• Department: Business Administration
• Course: Business Administration 2257
• Professor: J S

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I(cid:373)po(cid:396)ta(cid:374)t (cid:395)uestio(cid:374): (cid:862)(cid:449)hat (cid:449)ill happe(cid:374) i(cid:374) the futu(cid:396)e if a (cid:272)e(cid:396)tai(cid:374) de(cid:272)isio(cid:374) is (cid:373)ade? (cid:863) Cost behaviour analysis is useful when preparing financial projections and budgets, for controlling and monitoring performance and in making many types of operating decisions. Cost behaviour analysis is an analytical tool. Allows us to determine the profitability of the firm at any given level of output. Costs are the expenses involved with being in business: costs are recurring outflows of funds. For the purposes of decision making, the most useful way of classifying costs is according to how they will behave in the future and, more specifically, how they will respond to changes in the volume of output. A total amount of a firms cost is the same in the different analysis forms. The most useful way to segment costs is according to the way they are expected to behave relative to the level of activity in the firm.