Chapter 3 managerial accounting.docx

Chapter 3 managerial accounting.docx - Chapter 3 managerial...

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Chapter 3 managerial accounting Fixed Cost – A cost that does not change in total as output changes (Rent, Salary, depreciation when using straight line method, etc.). The more units you make, the fixed cost per unit becomes less (more units to spread the fixed costs to). The total fixed costs remain the same no matter how many units are made. Variable Cost – Increases in total with an increase in output and decreases in total with a decrease in output (DM, DL, utilities, etc.). With the exception of quantity discounts, the variable cost PER UNIT remains the same (variable costs in total goes up as output goes up). Mixed Costs – has both a fixed and variable part. For example, you may pay your sales staff $10 per hour plus commission based on sales. The $10 per hour is the fixed portion; the commission is the variable portion. Step Costs – Display a constant level of cost for a range of output, then jumps to a high lever at
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