Chapter 3 - Chapter 3 Chapter 3 Variable and Full Costing Managers spend lots of time dealing with operating activities i.e the daily operations of

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 3 Variable and Full Costing Managers spend lots of time dealing with operating activities, i.e., the daily operations of their company. Where are operating activities reported? 1. income statement --accrual basis --Includes revenues earned and expenses incurred 2. statement of cash flows. --cash basis --cash received and cash paid Because accrual basis reflects the amount of profit a company reports to external users, investors, creditors, and taxing agencies are very concerned about how much profit a company will report. Managers need to know not only if the company is profitable, but also what contributes to the profit. Does one product contribute more than another? Are a company’s services it offers profitable? Cost Behavior and Profits As you saw in earlier chapters, costs incurred to earn profit can be categorized in different ways. This chapter focuses on cost behavior—fixed and variable cost behaviors. Costs are classified based on how they behave when more units are produced. Remember that cost behavior can be based on the total cost or the cost for one unit . When thinking about how a cost behaves, always think about the total cost. Total fixed costs stay the same in total no matter if more items are produced and sold, such as rent or insurance.
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/20/2011 for the course ACC 101 taught by Professor Xyz during the Spring '11 term at Ohio State.

Page1 / 3

Chapter 3 - Chapter 3 Chapter 3 Variable and Full Costing Managers spend lots of time dealing with operating activities i.e the daily operations of

This preview shows document pages 1 - 2. Sign up to view the full document.

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