This chapter discusses classifying costs and methods for estimating cost behavior. All managerial decisions deal with choices among different activity levels. Managers must estimate which costs will vary with the activity and by how much. | Cost Drivers and Cost Behavior CHAPTER 5 © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. PowerPoint Presentation by LuAnn Bean Professor of Accounting Florida Institute of Technology Managerial Accounting 11E Maher/Stickney/Weil Chapter 5: Cost Drivers and Cost Behavior CHAPTER GOAL This chapter discusses classifying costs and methods for estimating cost behavior. Fixed costs Variable costs All managerial decisions deal with choices among different activity levels. Managers must estimate which costs will vary with the activity and by how much. ☼ ☼ This chapter discusses methods of classifying costs into fixed and variable components. Nearly all managerial decisions deal with choices among different activity levels; hence, the manager must estimate which costs will . | Cost Drivers and Cost Behavior CHAPTER 5 © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. PowerPoint Presentation by LuAnn Bean Professor of Accounting Florida Institute of Technology Managerial Accounting 11E Maher/Stickney/Weil Chapter 5: Cost Drivers and Cost Behavior CHAPTER GOAL This chapter discusses classifying costs and methods for estimating cost behavior. Fixed costs Variable costs All managerial decisions deal with choices among different activity levels. Managers must estimate which costs will vary with the activity and by how much. ☼ ☼ This chapter discusses methods of classifying costs into fixed and variable components. Nearly all managerial decisions deal with choices among different activity levels; hence, the manager must estimate which costs will vary with the activity and by how much. VARIABLE COSTS: Definition Are costs that change in total as the level of activity changes. LO 1 FIXED COSTS: Definition Are costs that do not change in total with changes in activity levels. Variable costs, also known as engineered costs, change in total as the level of activity changes. An engineered cost bears a definitive physical relationship to the activity measure. Direct materials cost is an engineered cost. It is impossible to manufacture more products without incurring greater materials costs. RELEVANT RANGE: Definition Is the range of activity over which the firm expects a set of cost behaviors to be consistent. LO 1 During short time periods, say, one month, the firm operates with a relatively fixed sales force, managerial staff, and set of production facilities. Consequently, many of its costs are fixed. Over long time spans, no costs are fixed because the firm can change staff size and sell or expand facilities. This fact .
