Chapter 18 Notes - Chapter 18 Three different types of...

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Chapter 18 Three different types of costs: Variable costs Fixed costs Mixed costs Variable Costs: Total variable costs change in direct proportion to changes in the volume of activity If activity increases, so does the cost Unit variable cost remains constant Fixed Costs: Do not change over wide ranges in volume Examples: Straight-line depreciation Salaries Fixed cost per unit is inversely proportional to activity The more activity, the less the fixed cost per unit The fix costs do not change Mixed Costs Have both a fixed and variable component Example: Utilities that charge a set fee per month, plus a charge for usage High-Low Method Method to separate mixed costs into variable and fixed components Select the highest level and the lowest level of activity over a period of time High-Low Method Steps
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Step 1: Find Variable Cost per Unit and Total Fixed Costs You find Variable Cost per Unit = CHANGE IN TOTAL COST / CHANGE IN ACTIVITY
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This note was uploaded on 12/05/2010 for the course BUS BUS taught by Professor Fox during the Fall '10 term at University of Baltimore.

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Chapter 18 Notes - Chapter 18 Three different types of...

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