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SS_Ch3_Sawyers_MgrACCT

# SS_Ch3_Sawyers_MgrACCT - The Behavior of Fixed and Variable...

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The Behavior of Fixed and Variable Costs As production volume changes, some costs may increase or decrease and other costs may remain stable. However, the predictability of specific costs to change with volume provides an important tool for managerial accountants.
Fixed Costs Fixed costs stay the same in total. They vary when expressed on a per unit basis.

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Variable Costs Variable costs vary in direct proportion to volume changes. They are constant when expressed as per unit amounts.
Relevant Range The relevant range is the normal range of production that can be expected for a particular product and company. The relevant range can also be viewed as the volume of production for which the fixed and variable cost relationships hold true.

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Types of Information Needed By External Users The concept of the relevant range allows managerial accountants to assume a linear cost relationship.
The Cost Equation The equation for a straight line is: y = a + bx Expressing the link between costs and production volume as an algebraic equation is useful.

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SS_Ch3_Sawyers_MgrACCT - The Behavior of Fixed and Variable...

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