ACCT 2301 Chapter Notes - Chapter 2: Contribution Margin, Dependent And Independent Variables, Operating Leverage

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16 Dec 2016
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Cost behavior: how a cost changes (increase, decrease, remain constant) relative to changes in some measure of activity (e. g. , the behavior of raw materials cost is to increase as the number of units of product made increases) Operating leverage: a measure of the extent to which fixed costs are being used in an organization. Operating leverage is greatest in companies that have a high proportion of fixed costs in relation to variable costs. Variable cost behavior: the behavior of variable cost per unit is contradictory to the word variable, because variable cost per unit remains constant regardless of how many units are sold. Total variable cost increases in direct proportion to the number of units sold. Mixed, or semivariable, costs: include both fixed and variable components. For example, star productions, inc. , has to pay a janitorial company a base fee of ,000 plus per hour required to do each cleanup job.

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