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 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.
Variable costs remain the same per unit at _____
Examples of Variable Costs:
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- Winter '14
- Finance, Vargo Video