Chapter Four Flashcards
What is cost behaviour
The way a cost changes as a production quantity or activity level changes
Define fixed costs
Do not vary with changes in production level within a certain range. They are incurred relating to a period rather than a product
What is variable costs
Vary according to the level of production
What is semi variable costs?
Cost which have a fixed element and a varied element so they vary as activities vary but not to the same degree
What is the unit cost?
The cost of each individual unit produced by the business or services provided
What is period costs?
Cost which relate to a time period rather than the outputs of product or services
What are materials and labour cost in the production department?
Mostly variable costs although book discounts when purchasing materials and a fixed number of production employees may affect them
What is the general rule for variable costs?
The cost is spent separately on each unit of production, the variable cost will be the same amount for each unit so a graph of unit cost against level of output would be a horizontal line no matter how many are produced the unit cost will be the same for each unit
Define period cost
Cost which relate to a time period rather than the output of products or services
What’s an example of fixed costs?
The salary of a supervisor, the rent of a factory, straight line depreciation of plant and machinery with the same amount is charged in each year
The total amount of variable cost changes…
Directly in line with changes and activity levels. The variable cost per unit is constant.
The total amount of fixed cost does not change in line with…
Activity levels with a certain range. The fixed cost per unit declines as activity level levels rise within that range.
The Tesla amount of semi variable cost changes in line with…
I change activity level, but not at the same rate because part of the cost is fixed
Cost can be classified according to what
Behaviour… Fixed, variable, semi variable
