SOCSCI 2AC3 Lecture Notes - Lecture 5: Long-Distance Calling, Fixed Cost, Cost Accounting
20 Feb 2018
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How a cost will react to changes in the level of business activity: Fixed costs remain unchanged when activity changes. Primary focus of cost accounting is to control costs, appreciation of what costs are: what kind of costs and what overall effect will it have. Your total long distance telephone bill is based on how many minutes you talk. Long distance telephone bill by minutes talked: totally diagonal. Your monthly basic telephone bill probably does not change when you make more local calls. Monthly basic telephone bill by number of local calls: straight line horizontal. Income statements for monthly sales of 400 & 401: gpm used to cover fixed expenses. C & d need to know how much is sold. No movies means no one to pay to work. Direct costs: costs that can be, easily and conveniently traced to a unit of product or other cost object, examples: direct material and direct labour.
