ACCT 2001 Chapter : Chapter 18
Document Summary
Cost behavior analysis: distinguish between variable and fixed cost. Is the study of how specific cost respond to changes in the level of business activities: some costs change and some remain same, first measure the key business activities, activities can be expressed in different term, ex. If activity level increases 10% then variable cost will increase 10: ex. Property tax, insurance, rent, supervisory salaries, and depreciation on buildings and equipment: relevant range, explain the significance of the relevant range. In most business situations, a straight line relationship does not exist for variable cost throughout the entire range of possible activity. That is, the percentage that each product represents of total sales will stay the same. This chapter will only be concerened with having only one product: when these 5 assumptions are not valid. The cvp analysis may be inaccurate: cvp income statement.