THDS 345 Lecture Notes - Lecture 17: Earnings Before Interest And Taxes, Net Income, Income Statement

• School: University of Regina
• Department: Theatre Design
• Course: THDS 345
• Professor: luvj

Document Summary

Variable costs are the total costs that changes with the change in level of activity. Variable costs are directly proportional to the level of activity. It means that the variable cost per unit does not change but the total variable costs changes with the level of activity. These are deducted from the sales to calculate the contribution margin. Fixed costs remain constant in total amount over a specific range of activity, these do not increase or decrease when the volume of manufacture changes. Fixed cost per unit is inversely proportional to the level of activity. These fixed costs are deducted from the contribution margin to calculate the net operating income. Total costs are the costs that comprise of both the variable costs and fixed costs. Total costs per unit will decrease when the level of activity increases and it will increase when the level of activity decreases.