250_Notes_3A - Relevant range =...

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ACCT 250 – ACCOUNTING FOR DECISION MAKING NOTES – CHAPTER 3A SPRING 2008 SUMMARY Here we examine the basics of cost behavior and classification: fixed vs. variable and direct, vs. indirect. NOTES 1) Cost behavior – fixed vs. variable How do costs change as volume increases? Fixed and variable are the most basic forms analysts use, but there are others…analysts work to make these other types look either fixed or variable a) Types of cost behavior Fixed costs = Variable costs = Mixed costs = Step fixed costs b) The relevant range of production – a tool for analysts Over wide ranges of production, very few costs fit neatly into one of the categories above, often cost behavior is not linear Linear costs are easier to estimate…so, analysts use the relevant range
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Unformatted text preview: Relevant range = 20b5889ed2e0381973b553440017bf2536edf9cb.doc PAGE 1 OF 2 ACCT 250 ACCOUNTING FOR DECISION MAKING NOTES CHAPTER 3A SPRING 2008 c) Average cost, total cost & marginal cost As production increases, what happens? Cost type Total Cost Average Cost Marginal Cost Fixed Variable 2) Direct vs. indirect costs A question cost assignmenthow the cost gets to the cost object a) The terminology Cost = Cost driver = Cost pool = Cost object = b) Direct vs. indirect Direct costs = Indirect costs = c) An extension of direct vs. indirect Direct materials = Prime costs Direct labor = Conversion costs Overhead = 20b5889ed2e0381973b553440017bf2536edf9cb.doc PAGE 2 OF 2...
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This note was uploaded on 04/18/2008 for the course ACCTG 250 taught by Professor Rabe during the Spring '08 term at Luther.

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250_Notes_3A - Relevant range =...

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