Chapter 1. L.O. 1 Describe the way managers use accounting information to create value in organizations. L.O. 2 Distinguish between the uses and users

COST ACCOUNTING:INFORMATION FOR DECISION MAKINGChapter 1

LEARNING OBJECTIVESL.O. 1 Describe the way managers use accounting

information to create value in organizations.

L.O. 2 Distinguish between the uses and users of costaccounting and financial accounting information.

L.O. 3 Explain how cost accounting information is usedfor decision making and performance evaluationin organizations.

L.O. 4 Identify current trends in cost accounting.

L.O. 5 Understand ethical issues faced by accountantsand ways to deal with ethical problems that youface in your career.

1-2

VALUE CHAIN

– Value added activities– Non value added activities

• The Value Chain describes a set of activities thattransforms raw materials and resources into thegoods and services end users purchase and consume.

L.O. 1 Describe the way managers use accountinginformation to create value in organizations.

1-3

THE VALUE CHAIN COMPONENTS

Research &Development

Design Purchasing

Marketing DistributionCustomerService

Production

LO1

1-4

MAJOR DIFFERENCES BETWEEN FINANCIAL & MANAGERIAL ACCOUNTING

Managerial Accounting

Financial Accounting

Purpose Decision making Communicate financial position to outsiders

Primary Users

Internal managers External users

Focus/Emphasis

Future-oriented Past-oriented

Rules Little GAAP guidence; cost vs. benefit

GAAP compliant; CPA audited

Time Span Current to very long time horizons

Historical monthly, quarterly reports

Behavioral Issues

Designed to influence employee behavior

Indirect effects on employee behavior

© 2009 Pearson Prentice Hall. All rights reserved.

L.O. 2 Distinguish between the uses and users of costaccounting and financial accounting information.

MANAGERIAL DECISIONS

• Individuals make decisions.

• Decisions determine the performanceof the organization.

• Managers use information from the accountingsystem to make decisions.

• Owners evaluate organizational and managerialperformance with accounting information.

L.O. 3 Explain how cost accounting information is usedfor decision making and performance evaluationin organizations.

1-6

COSTS FOR DECISION MAKING

• Carmen’s Cookies has been making and sellingcookies through a small store downtown.

• One of her customers suggests that she expandoperations and sell to wholesalers and retailers.

• Should Carmen expand operations?

LO3

1-7

CARMEN’S COST DRIVERS

DriverCost

Rent

Insurance

Labor

Ingredients

Number of stores

Number of cookies

LO3

1-8

DIFFERENTIAL COSTS

• Costs that change in response to a particularcourse of action

• Differential costs change (differ) between actions.

LO3

1-9

DIFFERENTIAL REVENUES

• Revenues that change in response to a particularcourse of action.

• Differential revenues change (differ) between actions.

LO3

1-10

DIFFERENTIAL COSTS, REVENUES, AND PROFITS

Sales revenueCosts:

FoodLaborUtilitiesRentOther

Total costs

Operating profits

$6,300

1,800 1,000 400 1,250 1,000$5,450

$ 850

$8,505a

2,700b

1,500b

600b

1,250 1,200c

$7,250

$1,255

$2,205

900 500 200 -0- 200$1,800

$ 405

(1) Status QuoOriginal Shop

Sales Only

(2) AlternativeWholesale & Retail

Distribution (3) Difference

Carmen’s CookiesProjected Income Statement for One Week

(a) 35 percent higher than status quo

(b) 50 percent higher than status quo

(c) 20 percent higher than status quo

LO3

1-11

TRENDS IN COST ACCOUNTING

1. Research and development

2. Design

3. Purchasing

4. Production

5. Marketing

6. Distribution

7. Customer service

8. ERP – Enterprise resource planning

9. Creating value in the organization

L.O. 4 Identify current trends in cost accounting.

1-12

COST ACCOUNTING INRESEARCH AND DEVELOPMENT

LO4

• Lean manufacturing techniques are not simplyabout production.

• Companies partner with suppliers in the developmentstage to ensure cost-effective deigns for products.

1-13

Being lean is based on three concepts: a) eliminate wasteb) continuous improvementc) respect for people.

COST ACCOUNTING IN DESIGN

• Product designers must write detailedspecifications on a product’s design.

• ABC assigns costs of activities needed to makea product, then sums the cost of those activitiesto compute the total cost of the product.

• This is often referred to as design formanufacturing (DFM).

LO4

1-14

BENCHMARKING

• Performance measurement indicateshow well a process is working.

• It minimizes unnecessary transaction processes.

LO4

• Benchmarking methods measure products,services, and activities against thebest performance.

• Benchmarking is an ongoing process resultingin continuous improvement.

1-15

From IMA Standard 67

COST ACCOUNTING IN PRODUCTION

• A lean accounting system provides measuresat a work cell or process level.

LO4

• JIT is an inventory system designed to lowerthe cost of maintaining excess inventory

1-16

A work cell is a group of dissimilar operations formed to produce a product. “As the organization changes structure, the information used to guide decisions and evaluate performance also needs to change. The content, format, and frequency of management accounting information need to change to support a system that is now customer-focused.”Lean accounting challenges many traditional cost account techniques

COST RELATIONSHIP MANAGEMENT

• Cost relationship management (CRM)is a system that allows firms to targetprofitable customers by assessingcustomer revenues and costs.

Casinos provides complimentary” services to some customers. (known as comping”).

LO4

1-17

OUTSOURCING

• Outsourcing occurs when a firm’s activities areperformed by another organization or individualin the supply or distribution chain.

• Nikon, for example, relies on UPS for distribution.

LO4

1-18

TOTAL QUALITY MANAGEMENT

• TQM is a management method whichfocuses on excelling in all dimensions.

• Cost of quality is a system that identifies the costof producing low quality items.

• The emphasis is placed on quality.Quality is defined by the customer.

LO4

1-19

ENTERPRISE RESOURCE PLANNING

• Information technology linking various processesof the enterprise into a single comprehensiveinformation system

Technology

Purchasing

Human Resources

Marketing

Production

Finance

LO4

1-20

CODE OF ETHICS

Institute of Management Accountants’ (IMA)Code of Ethics: Standards

1. Competence

2. Confidentiality

3. Integrity

4. Credibility

1-21

COMPETENCEMembers have a responsibility to:

1. Maintain an appropriate level of professional expertiseby continually developing knowledge and skills.

2. Perform professional duties in accordance withrelevant laws, regulations, and technical standards.

3. Provide decision support information and recommendationsthat are accurate, clear, concise, and timely.

4. Recognize and communicate professional limitationsor other constraints that would preclude responsiblejudgment or successful performance of activity.

1-22

CONFIDENTIALITYMembers have a responsibility to:

1. Keep information confidential except when disclosureis authorized or legally required.

2. Inform all relevant parties regarding appropriate useof confidential information.

3. Refrain from using confidential information for unethicalor illegal advantage.

4. Monitor subordinates’ activities to ensure compliance.

1-23

INTEGRITYMembers have a responsibility to:

1. Mitigate actual conflicts of interest, regularly communicatewith business associates to avoid apparent conflicts ofinterest. Advise all parties of any potential conflicts.

2. Refrain from engaging in any conduct that would prejudicecarrying out duties ethically.

3. Abstain from engaging in or supporting any activity thatmight discredit the profession.

1-24

CREDIBILITYMembers have a responsibility to:

1. Communicate information fairly and objectively.

2. Disclose all relevant information that could reasonablybe expected to influence an intended user’s understandingof the reports, analyses, or recommendations.

3. Disclose delays or deficiencies in information, timeliness,processing, or internal controls in conformance withorganization policy and/or applicable law.

1-25

COST CONCEPTS AND BEHAVIORChapter 2

LEARNING OBJECTIVES

L.O. 1Explain the basic concept of “cost.”

L.O. 2Explain how costs are presented in financial statements.

L.O. 3Explain the process of cost allocation.

L.O. 4Understand how material, labor, and overhead costs areadded to a product at each stage of the production process.

L.O. 5Define basic cost behaviors, including fixed, variable,semivariable, and step costs.

L.O. 6Identify the components of a product’s costs.

L.O. 7Understand the distinction between financial andcontribution margin income statements.

2-27

WHAT IS A COST?

• Cost is a sacrifice of resources.• All Expenses are costs• Not all costs are expenses when

sacrifice is made

L.O. 1Explain the basic concept of “cost.”

2-28

COST VERSUS EXPENSES

Cost

Outlay CostPast, present,or future cash

outflow

Opportunity CostsForgone benefit fromthe best alternative

course of action

ExpenseCost charged against

revenue in anaccounting period

LO1

2-29

PRESENTATION OF COSTSIN FINANCIAL STATEMENTS

L.O. 2Explain how costs are presented in financial statements.

Income Statements

Service company

Revenues– Cost of services sold= Gross margin– Marketing and

administrative costs= Operating profit

The excess of operating revenue over costsnecessary to generate those revenues

Cost ofbillablehours

2-30


Income Statements

Merchandising company

Revenues– Cost of goods sold= Gross margin– Marketing and


The excess of operating revenue over costsnecessary to generate those revenues

Expense assignedto products soldduring a period

LO2

2-31


Sales revenue– Cost of goods sold= Gross margin– Marketing and


Cost incurred to manufacturethe product sold

Product costs recorded as“inventory” when cost is incurred

Period costs recorded asan expense in the period

the cost is incurred

Expensedwhen sold

Income Statements

Manufacturing company

LO2

2-32

PRODUCT VERSUS PERIOD COSTS

• Two types of manufacturing costs:

Product costs:Costs related to

inventory

Period costs:Non-manufacturing

costs related to the firm

LO2

2-33

PRODUCT VERSUS PERIOD COSTS

Product costs:Costs that are recorded

as an asset in inventory whenincurred and expensed as

Cost of Goods Sold when sold

Period costs:Costs recognized for financial

reporting when incurred

LO2

2-34

DIRECT AND INDIRECTMANUFACTURING COSTS

Direct costs:Costs that, for a reasonable cost, can

be directly traced to the product.

Direct materials:Materials directly

traceable to the product

Direct labor:Work directly traceable to

transforming materialsinto the finished product

LO2

2-35

DIRECT AND INDIRECTMANUFACTURING COSTS

Indirect costs:Costs that cannot reasonably

be directly traced to the product.

Manufacturing overhead:All production costs except

direct materials and direct labor.

Indirect materials Other indirect costsIndirect labor

LO2

2-36

PRIME COSTS ANDCONVERSION COSTS

Prime costs:The “primary” costs

of the product

Conversion costs:Costs necessary to“convert” materials

into a product

Directmaterials

Directlabor

Directlabor

Manufacturingoverhead

LO2

2-37

NON-MANUFACTURING COSTS

• Recognized as expenses when the costs are incurred

Marketing:Costs necessary to

sell the products

Administrative:Costs necessary to

operate the business

Advertising

Sales commissions

Shipping costs

Executive salaries

Data processing

Legal costs

LO2

2-38

COST ALLOCATION

L.O. 3Explain the process of cost allocation.

• It is the process of assigning indirect coststo products, services, business units, etc.

2-39

COST ALLOCATION

1. Define the cost pool:The collection of costs to be assigned to cost objects

2. Determine the cost allocation rule:The method used to assign costs in the cost pool to cost objects

3. Assign the costs in the cost pool to the cost object:Any end to which a cost is assigned – product,product line, department, customer, etc.

LO3

2-40

COST ALLOCATION: EXAMPLE

• Rockford Corporation has two divisions, East Coast andWest Coast. Both divisions are supported by the IT Group.

East Coast West Coast Total

Revenues $80 million $20 million $100 million

1. Define the cost pool: IT department’s costs of $1,000,000

2. Determine the cost allocation rule: IT costs are allocated based ondivisional revenue. (% of revenue)

3. Assign to the cost object: East Coast: 80% of costWest Coast: 20% of cost

LO3

2-41

COST FLOW DIAGRAM

Corporate IT Group$1,000,000

East Coast$800,000

West Coast$200,000

Allocated

2-42

DETAILS OF MANUFACTURINGCOST FLOWS

L.O. 4Understand how material, labor, and overhead costs areadded to a product at each stage of the production process.

• Product costs are recorded in inventory when costs are incurred.

• A manufacturing company has three inventory accounts:

1. Raw Materials Inventory:Materials purchased to make a product

2. Work-in-Process Inventory:Products currently in the production process,but not yet completed

3. Finished Goods Inventory:Completed products that have not yet been sold

2-43

INVENTORY ACCOUNTS– THE BALANCE SHEET

Beg. RM inventory

+ Purchases

= Raw materialsavailable forproduction

– Ending RM inventory

= Raw materialstransferred to WIP

Direct MaterialsInventory

Beg. WIP inventory

+ Direct materialstransferred fromraw materials

+ Direct labor

= Total manufacturing costs

– Costs of goods completedand transferred tofinished goods (or cost ofgoods manufactured)

+ Manufacturing overhead

= Ending WIP inventory

Work-in-ProcessInventory

Beg. FG inventory

+ Cost of goodscompleted andtransferred from WIP

= Goods availablefor sale

– Cost of goods sold

= Ending FG inventory

Finished GoodsInventory

To the IncomeStatement

LO4

2-44

HOW COSTS FLOW THROUGHTHE STATEMENTS

JACKSON GEARSIncome Statement

For the Year Ending December 31, Year 200X

Sales $20,450,000Less: Cost of goods sold 13,100,000Gross margin $ 7,350,000Less: Marketing and administrative expenses 3,850,000Operating profit $ 3,500,000

LO4

2-45


JACKSON GEARSCost of Goods Manufactured Statement

For the Year Ending December 31, Year 200X ($000)

Beginning work-in-process inventory, January 1 $ 270Manufacturing costs during the year:Direct materials:

Beginning inventory, January 1 $ 95Add: Purchases 5,627

Direct materials available $5,722Less: Ending inventory, December 31 72

Direct material put into production $5,650Direct labor 1,220Manufacturing overhead 6,780

Total manufacturing costs incurred 13,650Total work in process during the year $13,920Less: Ending work-in-process inventory, December 31 310Cost of goods manufactured $13,610

LO4

2-46


JACKSON GEARSCost of Goods Sold Statement

For the Year Ending December 31, Year 200X ($000)

Beginning finished goods inventory, January 1 $ 420Cost of goods manufactured 13,610Finished goods available for sale $14,030Less: Ending Finished Goods Inventory, December 31 930Cost of goods sold $13,100

LO4

2-47

COST BEHAVIOR

L.O. 5Define basic cost behaviors, including fixed,variable, semivariable, and step costs.

Cost behavior:How costs respond to a change in

activity level within the relevant range

Relevant range:Activity levels within which a given total fixedcost or unit variable cost will be unchanged

2-48

FIXED COSTS

Cost ($)

Activity Level

• Fixed costs remain unchanged as volumechanges within the relevant range.

• Fixed costs per unit varies inversely to a changein activity.

• Fixed costs are “fixed” in “total” as activity changes.

LO5

2-49

VARIABLE COSTS• Costs that change in direct proportion with a

change in the volume within the relevant range

• Variable costs “vary” in “total” as activity changes.

• Variable cost per unit stays constant whenactivity changes within the relevant range.

Cost ($)

Activity Level

LO5

2-50

RELEVANT RANGE

0 1000 2000 3000 4000 5000 60000

20000

40000

60000

80000

100000

120000 Chart Title

Volume

Fix

ed

Co

sts

LO5

2-51

SEMIVARIABLE COSTS

Cost ($)

Activity Level

• Costs that have both fixedand variable components

• Also known as mixed costs

LO5

2-52

STEP COSTS• Costs that increase in total with steps when

the volume changes to a particular level

• Step costs are also known as semifixed costs.

Cost ($)

Activity Level

LO5

2-53

COMPONENTS OF PRODUCT COSTSUNIT BASIS

L.O. 6Identify the components of a product’s costs.

Full cost:The sum of all costs of manufacturingand selling a unit of the product

Full absorption cost:The sum of all variable and fixed costsof manufacturing a unit of the product

Variable cost:The sum of all variable costs of manufacturingand selling a unit of the product

2-54

COMPONENTS OF PRODUCT COSTS

Direct materials = $8

Direct labor = $7

Variable manufacturingoverhead = $8

Fixed manufacturingoverhead = $6

Variable marketing andadministrative costs = $4

Fixed marketing andadministrative costs = $7

Full costper unit= $40

Full absorptioncost per unit

= $29

Variablemanufacturing

cost = $23

Unitvariable

cost = $27

Variablemarketing andadministrative

costs = $4

LO6

2-55

MAKING COST INFORMATION USEFUL

L.O. 7Understand the distinction between financialand contribution margin income statements.

Full absorption costing:• Required by GAAP• Used for:

– Financial purposes– External reporting

Variable costing:• Used for:

– Managerial purposes– Internal decision

making

Sales revenue


= Gross margin

Sales revenue

– Variable costs

= Contribution margin

2-56

MAKING COST INFORMATION USEFUL

Financial incomestatement

Full absorptioncosting

Sales price

– Full absorption cost

= Gross margin

Variablecosting

Contribution marginincome statement

Sales price

– Variable costs


LO7

2-57

INCOME STATEMENT:FULL ABSORPTION COSTING

Sales revenue


= Gross margin

– Marketing andadministrative costs

= Operating profit

Full absorption

Variable and fixedmanufacturing costs

Period costs

Variable and fixedmarketing and

administrative costs

LO7

2-58

INCOME STATEMENT:VARIABLE COSTING

Sales revenue

– Variable costs


– Fixed costs

= Operating profit

Variable manufacturing costsand variable marketing

and administrative costs

Fixed manufacturing costsand fixed marketing and

administrative costs

LO7

2-59

REVIEW FORYOURSELF

FIXED COST BEHAVIOR

Increases Decreases

Total Fixed Cost Remains constant Remains Constant

Fixed Cost Per Unit Decreases Increases

Consider the followingconcert example where Sheryl Crow

will be paid $48,000 regardless of the

number of tickets sold.

When activity . . i.e. # units

FIXED COST BEHAVIORTickets sold 2,700 3,000 3,300

Total Cost of Band 48,000$ 48,000$ 48,000$

Per Unit Cost of Band 17.78$ 16.00$ 14.55$

$48,000 ÷ 3,000 Tickets = $16.00 per Ticket

VARIABLE COST BEHAVIOR

Increases Decreases

Total Variable Cost

Increases Proportionately

Decreases Proportionately

Variable Cost Per Unit

Remains Constant Remains Constant

When activity . . .

Let’s see what happens to the concert

example if the band receives $16 per

ticket instead of $48,000.

Tickets sold 2,700 3,000 3,300

Band Cost per Ticket Sold 16$ 16$ 16$

Total Cost of Band 43,200$ 48,000$ 52,800$

The total variable cost increases in direct proportion to the number of tickets sold.

Variable unit cost per ticket remains at$16 regardless of the number of tickets sold.

VARIABLE COST BEHAVIOR

THE RELEVANT RANGE Example: Office space is

available at a fixed rental rate of $30,000 per year in increments

of 1,000 square feet. As the business grows more

space is rented, increasing the total cost.

Continue

Re

nt

Co

st

in

Th

ou

sa

nd

s o

f D

olla

rs

0 1,000 2,000 3,000 Rented Area (Square Feet)

0

30

60

THE RELEVANT RANGE

90

Relevant

Range

Total fixed cost doesn’t change for a range of activity,

and then jumps to a new higher cost for

the next higher range of activity.

OPERATING LEVERAGE A measure of the extent to which fixed

costs are being used in an organization.

Operating leverage is greatest in companies that have a high proportion of fixed costs in relation to

variable costs.

Consider the followingconcert example where

all costs are fixed.

OPERATING LEVERAGE

Tickets sold 2,700 3,000 3,300

Revenue ($18 per ticket) 48,600$ 54,000$ 59,400$

Cost of Band (Fixed) 48,000 48,000 48,000

Gross Profit 600$ 6,000$ 11,400$

When all costs are fixed, every additional sales dollar contributes one dollar to gross profit.

10% RevenueIncrease

90% GrossProfit Increase

RISK AND REWARD ASSESSMENT

Risk refers to the possibility thatsacrifices may exceed benefits.

Risk may be reduced byconverting fixed costs

into variable costs.

Let’s see what happens to the concert example if the band receives $16 per

ticket instead of $48,000.

Tickets sold 2,700 3,000 3,300

Revenue ($18 per ticket) 48,600$ 54,000$ 59,400$

Cost of Band ($16 per ticket) 43,200 48,000 52,800

Gross Profit 5,400$ 6,000$ 6,600$

Shifting the cost structure from fixed to variable notonly reduces risk but also the potential for profits.

RISK AND REWARDASSESSMENT

10% RevenueIncrease

10% GrossProfit Increase

RELATIONSHIP BETWEEN COSTBEHAVIOR AND REVENUE

Fixed Cost Structure

$

Units

Revenue

Fixed CostProfit

Loss

RELATIONSHIP BETWEEN COSTBEHAVIOR AND REVENUE

Variable Cost Structure

Variable Cost

Revenue

Profit

$

Units

THE EFFECT OF COST STRUCTUREON PROFIT STABILITY

VariableCosts

FixedCosts

Do companieswith higher levels of

fixed costs experiencemore earnings

volatility?


Units Sold 10 10 10

Selling Price Per Unit 10$ 10$ 10$

Variable Cost Per Unit 0 3 6

Sales Revenue 100$ 100$ 100$

Total Variable Cost 0 30 60

Total Fixed Cost 60 30 0

Net Income 40$ 40$ 40$

All Fixed Company

Combination Company

All Variable Company

Now Let’s see what happens whenthe number of units sold increases.


Units Sold 11 11 11







All Fixed Company

Combination Company


The income increase is greaterin the All Fixed Company.

+10%

+25%


VariableCosts

FixedCosts

If sales decrease,will the income

decrease be greaterin the All Fixed

Company?


Units Sold 9 9 9







All Fixed Company

Combination Company


Yes, the income decrease is greaterin the All Fixed Company.

-10%

-25%


VariableCosts

FixedCosts

Level of Fixed Cost

Earnings Volatility

High High

Low Low

DETERMINING THE CONTRIBUTION MARGIN Total Unit

Sales Revenue 100,000$ 50$

Less: Variable Costs 60,000 30

Contribution Margin 40,000$ 20$

Less: Fixed Costs 30,000

Net Income 10,000$

The contribution margin format emphasizes cost behavior. Contribution margin covers fixed costs

and provides for income.

MEASURING OPERATING LEVERAGE USING THE CONTRIBUTION MARGIN

Contribution margin

Net income

Operating

Leverage=

Show mean example.


Actual sales 5,000

HammersSales 50,000$ Less: variable expenses 30,000 Contribution margin 20,000 Less: fixed expenses 15,000 Net income 5,000$

$20,000

$5,000

Operating

Leverage= = 4

A measure of how a percentagechange in sales will effect profits.


Curent sales 5,000 Hammers

Increased sales 5,500 Hammers

Sales 50,000$ 55,000$ Less: variable expenses 30,000 33,000 Contribution margin 20,000 22,000 Less: fixed expenses 15,000 15,000 Net income 5,000$ 7,000$

A 10 percent increase in sales results in a 40 percent increase in net income.

COST BEHAVIOR SUMMARIZED

Your monthly basic telephone bill is probably fixed and does not change when you make more local calls.

Number of Local Calls

Mo

nth

ly B

as

ic

Tele

ph

on

e B

ill

Total Fixed Cost

Number of Local Calls

Mo

nth

ly B

as

ic T

ele

ph

on

e

Bill

pe

r L

oc

al C

all


The fixed cost per local call decreasesas more local calls are made.

COST BEHAVIOR SUMMARIZED Your total long distance telephone bill

is based on how many minutes you talk.

Minutes Talked

Tota

l Lo

ng

Dis

tan

ceTe

lep

ho

ne

Bill

Tota

l Var

iable

Cost

Minutes Talked

Pe

r M

inu

teTe

lep

ho

ne

Ch

arg

e


The cost per minute talked is constant.

For example, 10 cents per minute.

Variable Cost Per Unit

Total Cost Cost Per Unit

Fixed CostsRemains Constant

Changes Inversely

Variable CostsChanges in

Direct ProportionRemains Constant

COST BEHAVIOR SUMMARIZEDWhen activity level changes . . .

THE RELEVANT RANGE Example: Office space is

available at a fixed rental rate of $30,000 per year in increments

of 1,000 square feet. As the business grows more

space is rented, increasing the total cost.

Continue

Re

nt

Co

st

in

Th

ou

sa

nd

s o

f D

olla

rs

0 1,000 2,000 3,000 Rented Area (Square Feet)

0

30

60

THE RELEVANT RANGE

90

Relevant

Range

Total fixed cost doesn’t change for a range of activity,

and then jumps to a new higher cost for

the next higher range of activity.

Activity

Tota

l Co

st

RelevantRange

THE RELEVANT RANGEOur variable cost assumption

(constant unit variable cost)

applies within the relevant range.

Our variable cost assumption

(constant unit variable cost)

applies within the relevant range.

Possible VariableCost Behavior

Our VariableCost Assumption

Documents

Chapter 1. L.O. 1 Describe the way managers use accounting information to create value in organizations. L.O. 2 Distinguish between the uses and users