Chapter 2 Flashcards
Fixed cost behaviour
When activity increases/decreases:
Total fixed costs stays constant
Fixed cost per unit decreases/increases
Variable costs behaviour
Total variable costs increases are units sold increases
Variable costs per unit stay constant
What are mixed costs?
Have factors of both fixed and variable components
What is the relevant range?
The range of activity
What is the operating leverage?
A measure of the extent to which fixed costs are being used in an organization
Contributed margin/net income
What is the format of an income statement under the contribution margin approach?
Sales revenue
- Variable costs
Contribution margin
- Fixed costs
Net income
How do you calculate predetermined overhead rate?
Budgeted overhead/expected activity