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BUS 254 chapter 6 notes

BUS 254 chapter 6 notes - Cost Structure = Relative...

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Cost Structure = Relative proportion of fixed, variable, and mixed costs in organizations Variable Costs = total dollar amount varies in proportion to activity level changes Variable with respect to activity base (whatever that caused the incurrence of variable costs) Unless told, we assume that activity base is total goods/services produced or sold by organization True Variable Cost = amount used vary in direct proportion to level of production activity E.g.: Direct material Step-Variable Costs = resource that is obtainable only in large chunks and cost changes only in response to fairly wide changes in activity level E.g.: maintenance workers (can vary in productivity) Curvilinear Costs = relationship between cost and activity is not straight line but curved Relevant Range = range of activity within which assumptions made about cost behavior by managers are valid Part where da curve is like a straight line Fixed Costs = Constant total dollar amount in the relevant range
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