Management and Organizational Studies 3370A/B Chapter Notes - Chapter 3: Variable Cost, Fixed Cost, Dependent And Independent Variables

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3370A/B
• Professor: Bill Dawson

Document Summary

Variable total variable cost is proportional to the activity level within the relevant range. Variable cost per unit remains the same over wide ranges of activity. Total fixed cost remains the same even when the activity level changes within the relevant range. Fixed cost per unit goes down as activity level goes up: variable costs, a variable cost is a cost whose total dollar amount varies in direct proportion to changes in the activity level, ex. Your total long-distance telephone bill is based on how many minutes you talk: a variable cost remains constant if expressed on a per unit basis, the cost per minute talked is constant, ex. A public utility with large investments in equipment will tend to have fewer variable costs. A service company will normally have a high proportion of variable costs. A merchandising company usually will have a high proportion of variable costs, like cost of sales.