MA_Chapter3 - ACTG 1P11 MA CHAPTER 3 Cost Behaviour...

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

View Full Document Right Arrow Icon
ACTG 1P11 – MA CHAPTER 3 A. Cost Behaviour a. Costs can be described as variable, fixed and mixed - Variable – cost total changes in proportion to the change in activity o VC is constant on a per-unit basis - When a variable cost is graphed, it will be a straight upward sloping line starting at the origin (0,0). EXAMPLE: Each bicycle requires one bicycle chain costing $8. (Variable cost is constant on a per-unit basis at $8. Total variable cost when 100 bicycles are produced is equal to $8 *100=$800.) - Fixed – remains constant in total dollar amount through wide ranges of activity - FC decreases on a per-unit basis as the activity level increases - When graphed, a fixed cost is a straight flat (180°) line that does not start at the origin. EXAMPLE: Fashion photographer Lori Yang rents studio spaces in a prestige location for $50,000 a year. She measures her firm’s activity in terms of the number of photo sessions. How would you graph the cost of studio rental in relation to firm activity? -
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 11/04/2011 for the course ACTG 1P11 taught by Professor Nchasse during the Fall '11 term at Brock University.

Page1 / 5

MA_Chapter3 - ACTG 1P11 MA CHAPTER 3 Cost Behaviour...

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