ADM 2304 Lecture Notes - Lecture 4: Long-Distance Calling, Variable Cost, Behaviorism
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E. g, suppose you are trying to decide whether to drive or take the train to portland to attend a concert. You have ample cash to do either, but you don"t want to waste money needlessly. > a variable cost is a cost whose total dollar amount varies in direct proportion to changes in the activity level. e. g, your total long distance telephone bill is based on how many minutes you talk. > a variable cost remains constant if expressed on a per unit basis. The cost per minute talked is constant. e. g, 10 cents per minute. > the proportion of variable costs differs across organizations e. g, a public utility with large investments in equipment will tend to have fewer variable costs. > direct materials is a true or proportionately variable cost because the amount used during a period will vary in direct proportion to the level of production activity.