Chapter 5

Chapter 5 - Cost Behavior: Analysis and Use Chapter Five...

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Accounting 2102 Chapter Five Cost Behavior: Analysis and Use
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2 Accounting 2102 Types of Cost Behavior Patterns . . . Two Extremes Fixed Costs o costs in total o Do not change o per unit cost o Inverse relationship o example Base Cell Phone Bill Variable Costs o costs in total o Direct relationship o per unit cost o Do not change o example Overage Charges Overage Charges Minutes Talked Base Cell Phone Bill Plan Minutes o equation y=b o equation y=mx
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3 Accounting 2102 Mixed Costs . . . fixed and variable components Mixed Costs o costs in total o Direct relationship o per unit cost o Inverse relationship o example Total Cell Phone Bill Total Cell Phone Bill Minutes Talked (over and above plan minutes) is the origin of this graph (0,0)? No b/c of fixed costs o equation y=mx+b
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4 Accounting 2102 Wazzup, LLC Wazzup, LLC , a manufacturer of Superfriends action heroes,  incurs three different costs, A, B, and C, in its  manufacturing operations. Per unit costs for each cost type  at two different activity levels are as follows: A B C 10,000 backhoes $15.00 $11.00 $20.00 20,000 backhoes $7.50 $9.00 $20.00 identify the cost behavior for each cost type A-fixed B-mixed C-variable
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5 Accounting 2102 Analysis of Mixed Costs use for planning (i.e. budgeting) and decision making (i.e. outsourcing) methods for determining cost behavior 1. account analysis (account classification) 1. visual fit (scattergraph) 1. high-low method 1. regression analysis (least squares regression) let’s review each method . . . . 
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6 Accounting 2102 Account Analysis review each ledger account make judgment call . . . fixed, variable, or mixed estimate cost amounts advantage Quick, easy disadvantage Not very accurate, requires extensive knowledge of the company
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This note was uploaded on 05/08/2008 for the course ACCT 2102 taught by Professor Farmer during the Spring '08 term at UGA.

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Chapter 5 - Cost Behavior: Analysis and Use Chapter Five...

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