ACC 406 Lecture Notes - Lecture 3: Dependent And Independent Variables, The Intercept, Cost Driver

• School: Ryerson University
• Department: Accounting
• Course: ACC 406
• Professor: Donna Zathy

Document Summary

Cost behaviour: general term to describe whether a cost changes when the level of activity changes. Foundation on what managerial accounting is built on. Costs can be variable, fixed or mixed. Knowing how costs change as output changes is essential to the planning, controlling and decision making. Fixed and variable costs have meaning only when they are related to some sort of output measure. Meaning you have to be looking at something to determine if the cost is variable or fixed. Cost driver: casual factor that measures the output of the activity that leads/causes the costs to change. These are a key determinant of cost behaviour. Identifying and managing these helps put managers to better predict, understand, and control their costs. First need to determine the underlying business activity. Then ask: what causes the cost of this specific activity to go up or down? what is driving the cost? .