BUS 254 Chapter Notes - Chapter 6: Cost Driver, Scatter Plot, Fixed Cost

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 254
• Professor: Michelle Iorio

Document Summary

Chapter 6: activity analysis, cost behaviour, and cost. Cost behaviour: relationship between cost and activity. Cost prediction: a forecast of cost at a particular level of activity by using knowledge of cost behaviour. Cost estimation: determining the cost behaviour pattern for a particular cost item: can be accomplished by analyzing historical data concerning costs and activity levels. Measure the activity in terms of units sold (cost driver) Changes in total in direct proportion to a change in the activity level (or cost driver) Variable cost per unit remains constants as activity changes. Costs that increase in small steps rather than continuously: represent inputs that are purchased and used in relatively small increments. Remains unchanged in total as the activity level (or cost driver) varies (blue) Facilities cost: property taxes, depreciation, salaries of maintenance staff. Fixed cost per unit does change as activity varies (green.