ADM2341 Chapter 6 Cost Behaviour

Your total long distance telephone bill is based on

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Unformatted text preview: one bill is based on how many minutes you talk. Minutes Talked LO 1 6-6 Types of Cost Behaviour Patterns Recall the summary of our cost behaviour Recall discussion from an earlier chapter. discussion Summary of Variable and Fixed Cost Behaviour Cost In Total Per Unit Variable Total variable cost is proportional to the activity level within the relevant range. Variable cost per unit remains the same over wide ranges of activity. Total fixed cost remains the same even when the activity level changes within the relevant range. Fixed cost per unit goes down as activity level goes up. Fixed LO 1 6-7 Variable Cost Per Unit Example Per Minute Telephone Charge A variable cost remains constant if expressed on a per unit basis. The cost per minute talked is constant. For example, 10 cents per minute. Minutes Talked LO 1 6-8 Extent of Variable Costs The proportion of variable costs differs across organizations. For example . . . A public utility with public large investments in equipment will tend to have fewer variable costs. A manufacturing company will often have many variab...
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