AFM102 Chapter Notes - Chapter 3: Cost Driver, Variable Cost, Fixed Cost

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cyanbat359

16 Jan 2016

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM102

Professor

Jie Joyce Tian

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Document Summary

Cost behaviour: how a cost will react/change as changes take place in the level of business activity. Cost structure: the relative proportion of each type of cost present in a firm. Ex. a firm might have many fixed costs but few variable or mixed costs. The total variable costs increases with more people, and decrease with less people. Only possible for variable costs to change if activity levels are outside the relevant range. Activity base: a measure of whatever causes a variable cost to be incurred: ex. The total cost of direct materials in a bicycle manufacturing company will increase as the number of bicycles produced increases. True variable costs: amount used during a period varies in direct proportion to the level of production activity and any amounts purchased but not used can be stored and carried forward to the next period as inventory.

Related Questions

Which of the following statements describes variable costs?

Costs that vary on a per unit basis as the level of activitychanges

Costs that vary in total in direct proportion to changes in thelevel of activity

Costs that remain the same in total dollar amount as the levelof activity changes

Costs that vary on a per unit basis but remain the same in totalas the level of activity changes

A variant of fiscal-year budgeting whereby a twelve-monthprojection into the future is maintained at all times iscalled:

A. Flexible budgeting

B. Continuous budgeting

C. Zero-based budgeting

D. Master budgeting

erinelk174

Name the definitions given below:

______________	1.	Technique that examines changes inprofits in response to changes in sales volumes, costs, andprices.
______________	2.	Percent by which the selling price (orrevenue) per unit exceeds the variable cost per unit, orcontribution margin as a percent of revenue.
______________	3.	Diagram of the relationship betweentotal revenues and total costs; illustrates how an organizationâsprofits are expected to change under different volumes ofactivity.
______________	4.	Index of the extent to which the costfunction is made up of fixed costs.
______________	5.	Total revenue minus total variable costs.
______________	6.	Proportion of different products or services that anorganization sells.
______________	7.	Excess of an organizationâs expectedfuture sales (in either revenue or units) above the breakevenpoint.
______________	8.	The level of activity where equal costor profit occurs across multiple alternatives.
______________	9.	Selling price per unit minus variablecost per unit.
______________ 10.		Level of operating activity at whichrevenues cover all fixed and variable costs and there is noprofit.
______________ 11.		Margin of safety as a percentage ofactual or estimated sales (units or revenues).
______________ 12.		A systematic tendency for people to beoverly optimistic about the outcomes of their plans andprojects.

Name the definitions given below:

______________	1.	Technique that examines changes inprofits in response to changes in sales volumes, costs, andprices.
______________	2.	Percent by which the selling price (orrevenue) per unit exceeds the variable cost per unit, orcontribution margin as a percent of revenue.
______________	3.	Diagram of the relationship betweentotal revenues and total costs; illustrates how an organizationâsprofits are expected to change under different volumes ofactivity.
______________	4.	Index of the extent to which the costfunction is made up of fixed costs.
______________	5.	Total revenue minus total variable costs.
______________	6.	Proportion of different products or services that anorganization sells.
______________	7.	Excess of an organizationâs expectedfuture sales (in either revenue or units) above the breakevenpoint.
______________	8.	The level of activity where equal costor profit occurs across multiple alternatives.
______________	9.	Selling price per unit minus variablecost per unit.
______________ 10.		Level of operating activity at whichrevenues cover all fixed and variable costs and there is noprofit.
______________ 11.		Margin of safety as a percentage ofactual or estimated sales (units or revenues).
______________ 12.		A systematic tendency for people to beoverly optimistic about the outcomes of their plans andprojects.

lavendermanatee604

AFM102 Chapter Notes - Chapter 3: Cost Driver, Variable Cost, Fixed Cost

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