BUS 108 Chapter Notes - Chapter 2: Direct Labor Cost, Indirect Costs, Fixed Cost
Document Summary
Cost accounting objectives: product costing for inventory valuation and income determination, providing information for planning and control of operations, providing cost data for managerial decision making. Cost classifications to describe cost behavior (vc, fc, mc) Managers often need to be able to predict how costs will change in response to changes in activity (such as the output of goods or services, # of machine hours, or. A simple way to describe cost behavior is the variable, fixed, and mixed cost classifications. A variable cost is constant per unit of activity but changes in total as the activity level rises and falls. It changes in direct proportion to changes in the activity level. Ta: cost per unit remains constant with changes in volume, total cost varies with changes in volume) A fixed cost is constant in total for any activity level within the relevant range of activity. But fixed cost per unit of activity is inversely related to the activity level.
