ADM2341 Chapter 6 Cost Behaviour

Step variable volume lo 1 6 12 step variable costs

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Unformatted text preview: Small changes in the level of production are Small changes in the level of production are not likely to have any effect on the number of not likely to have any effect on the number of maintenance workers employed. maintenance workers employed. Volume LO 1 6-13 Step-Variable Costs Cost Only fairly wide changes in the activity level will cause a change in the number of maintenance workers employed Volume LO 1 6-14 The Linearity Assumption and the Relevant Range Total Cost A straight line A straight line Economist’s closely closely Curvilinear Cost approximates a approximates a Function curvilinear curvilinear Relevant Range variable cost variable cost lline within the ine within the relevant range. relevant range. Accountant’s Straight-Line Approximation (constant unit variable cost) Activity LO 1 6-15 Types of Cost Behaviour Patterns Let’s look at fixed cost behaviour on the next Let’s screens. screens. 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....
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