ACCT 2550 Chapter Notes - Chapter 2: A Question Of Balance, Financial Statement, Perpetual Inventory
22 Dec 2017
School
Department
Course
Professor
Document Summary
Chapter 2: cost concepts: costs can be classified using four broad categories, behavior, traceability, relevance, function. Cost classification by behavior: cost behavior: the way a cost will respond to changes in the level of an organization"s (cid:271)usiness a(cid:272)tivity, ex. Number of passengers flying air canada: as the activity level rises or falls, a cost may rise or fall or may remain constant, fixed or variable costs. Total cost of battery packs is increasing but the average battery pack cost per car is constant: ex. Cost of goods sold, commissions to salespeople, billing costs, costs of supplies, wages, shipping costs. Straight-line depreciation, insurance, property taxes, rent, supervisory salaries, advertising: monthly cost does not change regardless of activity level, average cost decreases as activity level increases. Cost classification by relevance: in general differential and opportunity costs are relevant for most decisions, sunk costs are irrelevant for any decision.
