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Instructor%20Notes%20-%20Chapter%2015

Instructor%20Notes%20-%20Chapter%2015 - Management 200T...

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Management 200T Cost Analysis for Control Chapter 15 Cost Classifications Relationship of Total Cost to Volume of Activity Understanding the behavior patterns of fixed and variable cost items is equally important In the process of analyzing performance, any differences between planned and actual costs should be evaluated As activity changes from that originally planned, the expected total amount of variable cost would be expected to change to an amount determined by multiplying the variable rate by the amount of activity achieved – essentially, as activity goes up, cost will go up in somewhat of a proportional amount Cost Classification according to a Time-Frame Perspective “Noncontrollable” cost – implies that there is really nothing the manager can do to influence the amount of the cost May be true in the short run, but in the long run every cost is controllable by someone Performance Reporting Characteristics of the Performance Report The principal objective of the performance report is to highlight activities that need management attention
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