Slide 1 ___________________________________ 2.4 Var iable Cost - - PDF document

Slide 1

2.4 Var iable Cost vs. F ixe d Cost

• Cost be havior
• How c osts be have at diffe r

e nt a c tivity le ve ls

• As ac tivitie s rise and fall:
• Some c osts will rise and fall
• Some c osts will stay the same
• Unde r

standing the se be ha viors is use ful in planning

2005 K D Ha the wa y-Dia l

___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ Slide 2

T

• tal Variable Costs
• Costs tha t r

ise and fall in dir e c t pr

• portion to the ac tivity
• E

xample of total var iable c ost is the your total long distanc e phone bill pe r month on your land line

Units of Ac tivity $ E xhibit T 2M4~1 T

• tal Varia ble c osts

2005 K D Ha the wa y-Dia l

___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ Slide 3

T

• tal F

ixe d Costs

• Costs tha t sta y

c onstant in total no matte r the a c tivity

• E

xample is the monthly c ost of ke e ping a land line phone whic h allows unlimite d loc al c alls

Units of Ac tivity $ E xhibit T 2M4~2 T

• tal F

ixe d c osts

2005 K D Ha the wa y-Dia l

___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________

Slide 4

Pe r Unit Variable Costs

• PE

R UNIT c osts that stay c onstant in total no matte r the a c tivity

• E

xample of pe r unit c ost is long dista nt c ost pe r minute on your land line phone

Units of Ac tivity $ E xhibit T 2M4~3 Pe r Unit Varia ble c osts

2005 K D Ha the wa y-Dia l

___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ Slide 5

Pe r Unit F ixe d Costs

• PE

R UNIT c osts that de c r e ase as the ac tivity inc r e ase s

• E

xample of a fixe d pe r unit c ost is the c ost pe r minute of loc al c alls on a land line phone de c r e ase as those total loc al c a ll minute s inc r e ase

Units of Ac tivity $ E xhibit T 2M4~3 Pe r Unit Varia ble c osts

2005 K D Ha the wa y-Dia l

___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ Slide 6

Variable and F ixe d Costs Pr

• ble m
• F

e lt use d in hat manufac tur ing

• E

le c tr ic ity use d to r un the ove ns at Wonde r Br e a d

• T

hr e e month adve rtising c a mpaign

• Prope r

ty insur a nc e

• n the CE

O’s offic e

• Bake r

’s salary at Wonde r Br e ad

• F

ibe rglass use d in the manufac tur ing

• f a spor

ts c a r

• CE

O’s salar y

De te rmine whic h of the following c osts are var iable or fixe d.

2005 K D Ha the wa y-Dia l

___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________

Slide 7

Variable and F ixe d Costs Pr

• ble m
• F

e lt use d in hat manufac tur ing

Va r ia ble

• E

le c tr ic ity use d to r un the ove ns at Wonde r Br e a d

Va r ia ble

• T

hr e e month adve rtising c a mpaign

F ixe d or Va ria ble

• Prope r

ty insur a nc e

• n the CE

O’s offic e

F ixe d

• Bake r

’s salary at Wonde r Br e ad

Va r iable

• F

ibe rglass use d in the manufac tur ing

• f a spor

ts c a r

Va r iable

• CE

O’s salar y F

ixe d

De te rmine whic h of the following c osts are variable or fixe d.

2005 K D Ha the wa y-Dia l

___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________