chapter_2ppt.pdf

# Lets order pizza 21 unit the pizza bill 21 friends

• 38

This preview shows pages 9–19. Sign up to view the full content.

Let’s order pizza! 2.1

This preview has intentionally blurred sections. Sign up to view the full version.

Unit The pizza bill… 2.1 Friends Total cost Cost per person 1 \$12.00 \$12.00 2 \$12.00 \$ 6.00 3 \$12.00 \$ 4.00 4 \$12.00 \$ 3.00
Unit Total cost remains constant with changes in volume Unit cost changes inversely with changes in volume Fixed relationship only holds over the relevant range Fixed cost 2.1 \$0.00 \$2.00 \$4.00 \$6.00 \$8.00 \$10.00 \$12.00 \$14.00 0 1 2 3 4 Totalcostofpizzas People

This preview has intentionally blurred sections. Sign up to view the full version.

Unit Friends Total cost 1 \$ 0.75 2 \$ 1.50 3 \$ 2.25 4 \$ 3.00 Remember to keep it constant 2.1 Friends Cost per person 1 \$12.00 2 \$ 6.00 3 \$ 4.00 4 \$ 3.00 Variable Cost Fixed Cost
Unit Depends on the time frame over which the costs are incurred and fixed. CommiUed vs. discre>onary 2.1 10-year factory lease COMMITTED 6-month adverKsing DISCRETIONARY CAUTION What effect will reducing the cost to \$0 have on the long-term health of the company?

This preview has intentionally blurred sections. Sign up to view the full version.

Unit Cost remains fixed in total over small range of volume or activity These small ranges are smaller than the relevant range of fixed cost Step-variable cost 2.1 \$0 \$70,000 \$140,000 \$210,000 \$280,000 \$350,000 \$420,000 0 501 1001 1501 2001 TotalCost Enrolled Students
Unit Cost contains both fixed and variable components Total cost AND unit cost varies with changes in volume Mixed cost 2.1 \$0 \$200 \$400 \$600 \$800 \$1,000 \$1,200 \$1,400 0 25 50 75 100 Totalcostofbanquet Guests Meals = \$10 per person Room rental = \$200 Meals are a variable cost Room rental is a fixed cost

This preview has intentionally blurred sections. Sign up to view the full version.

Unit Friends Total cost (room and meal) Cost per guest 25 \$ 450 \$18.00 50 \$ 700 \$14.00 75 \$ 950 \$12.67 100 \$1,200 \$12.00 Variable cost = \$10 per person Fixed cost = \$200.00 Mixed cost example 2.1
Cost Es1ma1on Unit 2.2 Universal Sports Exchange

This preview has intentionally blurred sections. Sign up to view the full version.

Unit Revisi>ng cost behavior 2.2 How do we break a mixed cost into its fixed and variable components?
This is the end of the preview. Sign up to access the rest of the document.
• Spring '08
• Huh
• Universal Sports

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern