AFM123 Chapter Notes - Chapter 2: Deferral, Executive Compensation, Income Statement

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM123
• Professor: Jiye Li

Document Summary

Organizations: gvmts, hospitals, educational institutions, merchandising, service, manufacturing companies, behaviour, traceability, relevance, function. Recall: 3 main activities of a manager: dealing w/ cost information by way of estimation (planning, analysis (implementation, reporting (control) Managers cannot estimate, analyze, and report if they do not have an understanding of costs. Merchandising: cost of goods sold, commissions to salespeople, billing costs. Manufacturing: wages of operations, shipping costs hospital: cost of supplies, drugs, meals: example: 0 to 2, 000 tests per month b/c the avg. fixed cost per unit increases/decreases inversely w/ changes in activity volume: examples of fixed costs: straight-line depreciation/amortization insurance property taxes rent supervisory salaries administrative salaries advertising, example: Summary: behaviour of cost (within the relevant range) Total variable cost changes as activity level changes. Total fixed cost remains the same even when the activity level changes. Variable cost per unit remains the same over wide ranges of activity. Fixed cost per unit goes down as activity level goes up.