Lets order pizza 21 unit the pizza bill 21 friends

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Let’s order pizza! 2.1
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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
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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
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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
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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?
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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
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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
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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
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Cost Es1ma1on Unit 2.2 Universal Sports Exchange
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Unit Revisi>ng cost behavior 2.2 How do we break a mixed cost into its fixed and variable components?
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  • Spring '08
  • Huh
  • Universal Sports

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