FINC 577 Chapter 5 Notes Outline

Chapter 5 4 cost cost behavior analysis continued for

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Unformatted text preview: 5-4 Cost Cost Behavior Analysis - Continued For an activity level to be useful: Changes Changes in the level or volume of activity should be ____________________________. The activity level selected is called the activity or volume index. The activity index: Identifies the activity that causes changes in the the behavior of costs. Allows costs to be classified according to their response to changes in activity as either: Variable Costs Fixed Costs Mixed Costs Chapter 5-5 Variable Costs Variable costs are costs that vary in total directly vary in and proportionately with changes in the activity level. Example: If the activity level increases 10 percent, total variable costs will increase 10 percent . will Example: If the activity level decreases by 25 percent, total variable costs will decrease by 25 percent. will _____ Variable costs remain the same per unit at _____ remain ________________. Chapter 5-6 Variable Variable Costs Examples of Variable Costs: Direct Materials. Direct Labor. Cost of...
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