Lecture 10_08_10 - Fixed costs : total remains constant...

Info iconThis preview shows pages 1–17. Sign up to view the full content.

View Full Document Right Arrow Icon
Click to edit Master subtitle style 2/10/11 Managerial Accounting Chapter 5 – Cost behavior
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2/10/11 Previous assumptions of cost behavior: every cost was variable
Background image of page 2
2/10/11 A company’s cost structure : - Variable costs - Step-variable costs - Fixed costs - Mixed costs
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2/10/11 Behavior of variable costs
Background image of page 4
2/10/11 Perspectives of variable costs in various industries - Public utilities (PCP&L): Typically heavy investments in equipment and facilities: - Few variable costs - Costs are insensitive to changes in level of activity - Manufacturing companies - Many variable costs (mfg and distribution) - Merchandising companies - High number of variable costs, cost of merchandise for resale - Service companies - Restaurant (many variable costs) - Consulting, banking (less number of variable costs)
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2/10/11 Step-variable costs : Increase or decrease in response to wide changes in activity
Background image of page 6
2/10/11 Importance of relevant range
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2/10/11
Background image of page 8
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 10
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 12
Background image of page 13

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 14
Background image of page 15

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 16
Background image of page 17
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Fixed costs : total remains constant within the relevant range of activity 2/10/11 2 types of fixed costs:-Committed fixed costs-Discretionary fixed costs 2/10/11 Fixed costs and the relevant range 2/10/11 Mixed costs : Y = a + bX Y= total mixed cost, a= minimum fixed cost, b = variable cost per unit over and beyond the minimum X = level of activity 2/10/11 Mixed cost example: Overall cost of providing X-ray services in a hospital: Fixed cost : Cost of equipment depreciation + salaries of radiologists + salaries of technicians. Variable costs : cost of x-ray films and supplies 2/10/11 BE 5-1 2/10/11 How to diagnose cost behavior (p.213): 2/10/11 2/10/11 Very quick and very dirty calculation of variable cost Variable cost/unit = $5,800 / 7,300 patient days = $0.79 per patient-day Y = $3,300 + $0.79X X = number of patient-days. 2/10/11 BE 5-2...
View Full Document

This note was uploaded on 02/08/2011 for the course ACCOUNTING 275 taught by Professor Ngo during the Spring '11 term at Rutgers.

Page1 / 17

Lecture 10_08_10 - Fixed costs : total remains constant...

This preview shows document pages 1 - 17. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online