Costs For Decision Making Flashcards
What is the definition of fixed costs
They remain constant over wide range of activity and are not affected by changes in activity
Zero volume of activity there will be
Some level of fixed costs
Fixed costs are almost always
Timebased
What are stepped fixed cause
They are costs which eventually increase or decrease by constant amount at various critical activity levels
What are variable costs
Costs that vary with the level of activity
At zero volume of activity variable cost is
Zero
What is marginal cost
The total of the variable cost per unit of production
What are semi-variable costs
They have an Element of both fixed and variable cost
What is total cost
Variable cost plus fix cost
What is the break even point
The volume of activity where there is neither a profit nor a loss
At the BEP volume of activity
Total sales revenue equals total costs i.e. total sales revenue equals fixed costs plus variable cost
CPU equals
Sales revenue per unit less variable cost per unit
What does CPU tell us
How much the sales price per unit exceeds the variable cost per unit
When does break even occur
When our total contribution from all units sold equals the fixed cost
What is the break even point calculated
Fixed costs over contribution per unit
