Management and Organizational Studies 3370A/B Chapter Notes - Chapter 3: Gross Margin, Longrun, Planning Horizon

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3370A/B
• Professor: Barry Hawn

Document Summary

Cost behavior: refers to how a cost will react or change as changes take place to the level of business activity. Cost structure: the relative proportion of each type of cost present in a firm. Variable cost: total dollar amount varies in direct proportion to changes in the acitivity level, variable cost remains the same if it expressed as a per unit basis. It is possible for the variable cost per unit to change once activity levels are outside the relevant range eg. quanitity discount is provided. The activity base: measure of whatever causes a variable cost to be incurred. Direct labour hours, machiene hours, units produced, units sold: activity base: total volume of goods and services produced or sold by the organization. In most merchandising companies, the cost of merchandise purchased for resale, a variable cost, constitutes a very large component of total cost.