Cost Behavior Fixed and Variable

Cost Behavior Fixed and Variable - Explain the meaning of...

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1 Explain the meaning of cost and behavior, and define and describe fixed and variable costs.
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2 Remember the definition of Cost Cost Cash or cash equivalent sacrificed for goods and/or services that are expected to bring a current or future benefit to the organization. ---
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3 Cost Behavior The way costs change as the related activity changes Fixed Cost A cost that does not change in total as output changes ---
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4 Cost Behavior The way costs change as the related activity changes Variable Cost Increases in total with an increase in output and decreases in total with a decrease in output ---
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5 Measures of Output “What causes the cost of this particular activity to go up (or down)?” To determine if a cost is fixed or variable, we must first determine the underlying business activity and ask ourselves…. In other words, we are trying to identify its driver.
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6 Relevant Range The range of output over which the assumed cost relationship is valid for the normal operations of a firm. Let’s take a closer look at
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This note was uploaded on 02/28/2012 for the course ACCT 2361 taught by Professor Severance during the Spring '08 term at Texas State.

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Cost Behavior Fixed and Variable - Explain the meaning of...

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