ACTG 2020 Chapter Notes - Chapter 3: Scatter Plot, The Intercept, Fixed Cost
Document Summary
Cost behaviour: the general term to describe whether a cost changes when the level of acivity changes. Cost driver: a casual measurement that causes costs to change. Idenifying and managing cost drivers helps managers to beter predict and control costs. Relevant range: the range of output over which an assumed cost relaionship is valid for the normal operaions of a irm. Management can easily decide to increase or decrease dollars spent on adverising: commited fixed costs: ixed costs that cannot be easily changed. Oten are those that involve a long- term contract or the purchase of property, plant, and equipment (ex: leasing of machinery or warehouse space) The lease cost is a commited ixed cost. Variable costs: costs that in total vary in direct proporion to changes in output within the relevant range (ex: yogen fruz: charge is dependent on the weight of the ice-cream)
