Managerial Acct 19 to 21

Managerial Acct 19 to 21 - _ _ Chapter 19 Cost Behavior and...

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___________________________________________________________ _____________________________________ Chapter 19 Cost Behavior and Cost - Volume - Profit Analysis ___________________________________________________________ _____________________________________ 1. Cost Behavior: refers to the manner in which a cost changes as a related activity changes. It has two factors: Activity Bases / Activity Drivers: We must identify the activities that are thought to relate to the cost incurred. Relevant Range: We must specify the range of activity over which the changes in the cost are of interest. 2. Variable Costs: Costs where the total dollar amount vary in proportion to changes in the level of activity. Unit costs remain constant with changes in the activity level. Example: Direct Materials, Direct Labor Costs, Fuel, wages, Sales Commissions, Electricity expense Graph: Unit Variable Cost Remains Constant Total Variable Cost Increase as Total Units Produced increase // Total Direct materials Cost increase 3. Fixed Costs: Costs that remain the same in total dollar amount as the level of activity changes. Unit costs vary with activity level changes. Example: Salaries, Depreciation, Property Insurance, Property Taxes Graph: Total Fixed Cost remains the same as the number of bottles produced chanages, Fixed cost per bottle changes 4. Mixed Costs: Cost that has characteristics of both variable and fixed costs, for analysis mixed costs are separated into their fixed and variable components. Example: Quality ontrol Department Salaries, Purchasing Cepartment Salaries, maintenance expenses, Warehouse expenses High-Low Method: uses the highest and lowest activity levels and their related costs to estimate the variable cost per unit and the fixed cost component of mixed costs. Variable Cosing/ Direct Costing: One method of reporting variable and fixed costs. Under this only variable costing, only the variable manufacturing costs (DM, DL and Variable Factory Overhead) are included in the product cost . Fixed factory overhead is an expense of the
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period in which it is incurred. 5. Cost-Volume-Profit Relationships: Systemic examination of the relationships among selling prices, sales and production volume, costs, expenses, and profits. For these analysis costs are separated into the Variable and Fixed categories. 6. Contribution Margin Concept:
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This note was uploaded on 11/07/2009 for the course MGT 3453 taught by Professor David during the Spring '09 term at Oklahoma State.

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Managerial Acct 19 to 21 - _ _ Chapter 19 Cost Behavior and...

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