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cornerstones chp 2

cornerstones chp 2 - Chapter 2 Cost Behavior 1 Accounting...

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May 26, 2011 Accounting 2102 1 Chapter 2 Cost Behavior
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May 26, 2011 Accounting 2102 2 What is cost behavior? foundation of managerial accounting Three main categories of cost behavior Variable Costs Fixed Costs Mixed Costs The cost driver chosen determines the cost behavior The identified cost behavior is only valid over the relevant range
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May 26, 2011 Accounting 2102 3 blah, blah, blah . . . let’s work through an example Let’s say you are on the planning committee for your high school class reunion. What costs would you incur? How does each cost behave? What is your cost driver?
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May 26, 2011 Accounting 2102 4 still planning . . . let’s look at a few of the costs individually . . . Variable Cost example in total per unit graph equation Mixed Cost example in total per unit graph equation Fixed Cost example in total per unit graph equation How would the relevant range come into play?
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May 26, 2011 Accounting 2102 5 Break it down . . . accounting records only show total costs . . . total costs can’t be used for planning and decision making methods to break down total costs into cost behavior categories high-low method scattergraph method regression analysis managerial judgment let’s look at each method individually
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