ACCT 9-19 Mixed Cost and CVP and BEP

ACCT 9-19 Mixed Cost and CVP and BEP - 1. Variable costs a....

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1. Variable costs a. Costs that vary in total directly and proportionately with changes in activity b. Examples: i. Direct material and direct labor ii. Sales commissions iii. Gasoline 2. Fixed costs a. Costs that remain the same in total regardless of changes in activity b. Per unit cost varies inversely with activity i. As volume increases, unit cost decreases, and vice versa c. Examples: i. Property taxes Insurance Salary iv. Depreciation d. A company rents its factory for $100000 per month e. Rent, a fixed cost, remains constant at all levels of activity (i.e. $100000 per month) f. On a per unit basis, the cost of rent increases or decreases as activity varies i. At 2,000 units, the unit cost is $5 At 10,000 units, the unit cost is $1 3. Range of activity a. Total variable costs Curvilinear
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b. Total fixed costs nonlinear c. Relative range i. The range of activity over which a company expects to operate during a year ii. Within this range, a straight line relationship usually exists for both variable and fixed costs 4. Mixed costs a. Costs that have both a variable cost element and a fixed cost element b.
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ACCT 9-19 Mixed Cost and CVP and BEP - 1. Variable costs a....

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