A cost or expense where the total changes in proportion to changes in volume or activity. For example, if a company pays a sales commission on all of its sales, commission expense is a variable expense because...
A cost or expense where the total changes in proportion to changes in volume or activity. For example, if a company pays a sales commission on all of its sales, commission expense is a variable expense because...
What is a variable cost? Author: Harold Averkamp, CPA, MBA Definition of Variable Cost A variable cost is a constant amount per unit produced or used. Therefore, the total amount of the variable cost will change...
Variable costs and expenses divided by net sales. To learn more, see Explanation of Break-even Point.
The amount by which total costs will change when an activity is increased by one unit. In the equation of the line, y = a + bx, the variable cost rate is represented by ‘b’ and the units of activity are...
See direct costing.
What is the high-low method? Author: Harold Averkamp, CPA, MBA Definition of High-Low Method The high-low method is a simple technique for determining the variable cost rate and the amount of fixed costs that are part of...
In least squares regression, what do y and a represent? Author: Harold Averkamp, CPA, MBA Here are the meanings of the components or symbols used in the least squares equation of y = a + bx: y is the dependent variable,...
Are insurance premiums a fixed cost? Author: Harold Averkamp, CPA, MBA The cost of the insurance premiums for a company’s property insurance is likely to be a fixed cost. The cost of worker compensation insurance is...
What is cost behavior? Author: Harold Averkamp, CPA, MBA Definition of Cost Behavior Cost behavior is an indicator of how a cost will change in total when there is a change in some activity. In cost accounting and...
for a given range of activity (number of visits). When the number of visits exceeds the upper limit of a range, the monthly cost jumps to a higher level and remains fixed until the visits exceed the new upper limit. A...
In the equation of a straight line, y = a + bx, ‘bx’ is the total variable cost resulting from the variable cost rate ‘b’ multiplied times the quantity ‘x’.
A symbol that indicates the variable cost rate and also the slope of a straight line. For example, in the equation of the straight line, y = a + bx, ‘b’ represents the variable cost rate per unit of...
What happens when the high-low method ends up with a negative amount? Author: Harold Averkamp, CPA, MBA The high-low method of determining the fixed and variable portions of a mixed cost relies on only two sets of data:...
What are the methods for separating mixed costs into fixed and variable? Author: Harold Averkamp, CPA, MBA Definition of Mixed Costs Mixed costs are partially a fixed cost and partially a variable cost. Mixed costs are...
Are direct costs fixed and indirect costs variable? Author: Harold Averkamp, CPA, MBA Direct Costs vs. Indirect Costs The terms direct costs and indirect costs could be referring to a product, a department, a machine,...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
What is a dependent variable? Author: Harold Averkamp, CPA, MBA In accounting, a dependent variable is likely to be the total of a mixed cost that will change as the result of several factors. A factor that causes the...
The indirect manufacturing costs that will change in proportion to the change in an activity such as machine hours. For example, a portion of a manufacturer’s electricity cost will vary with the change in the...
How do you determine the fixed portion of overhead cost? Author: Harold Averkamp, CPA, MBA I suggest that the first step in determining the fixed portion of a mixed cost (a cost that is partially fixed and partially...
a company's break-even point? What is a fixed expense? How do you reduce the break-even point? What is marginal cost? What is sales mix? What is elastic demand? What is the coefficient of correlation? What are the...
What are direct materials? Author: Harold Averkamp, CPA, MBA Definition of Direct Materials Direct materials are defined as: Traceable matter that is converted by a manufacturer into products Part of manufacturer’s...
is a cost variance? What are production costs? What is the coefficient of correlation? What is work-in-process inventory (WIP)? Is rent expense a period cost or a product cost? What are the methods for separating mixed...
What are semivariable costs? Author: Harold Averkamp, CPA, MBA Definition of Semivariable Costs Semivariable costs are costs or expenses whose behavior is partially fixed and partially variable. That is, part of the...
demand? How do you calculate opportunity costs? What is the coefficient of correlation? What is a rolling budget? What are the methods for separating mixed costs into fixed and variable? What is meant by the term...
Isn't all overhead fixed? Author: Harold Averkamp, CPA, MBA Not all overhead is fixed. Some manufacturing overhead costs, which are also referred to as indirect factory costs, are variable. A common example of a...
operations. Examples of Managerial Accounting Topics Managerial accounting topics often include: Job order costing Process costing Absorption costing vs. variable costing Understanding cost behavior and...
of a variable expense. True Right! If a retailer sells more units of goods, sales revenue increases and the cost of goods sold also increases. When fewer units of goods are sold, sales revenue decreases and the cost of...
What is an independent variable? Author: Harold Averkamp, CPA, MBA In accounting, an independent variable is ideally a factor that causes a change in the total amount of the dependent variable. In other words, an...
prices, variable costs plus an opportunity cost, or some other amount. A concern with transfer pricing is whether the transfer price will cause a subunit’s manager to take the action that is best for the company as a...
linear regression analysis is helpful in determining the two components of a mixed cost (also known as semivariable cost): The amount that is fixed or constant The variable rate (the rate by which the total cost changes...
A technique used to determine the variable rate (slope of a total cost line) of an independent variable and the fixed amount by using just two points: the highest point and the lowest point. For example, if at the...
. For example, the cost of the flour in a loaf of bread is a variable expense for the bakery. The cost of flour will be higher in total as more loaves of bread are produced. The cost of flour is probably constant on a...
What is a variable expense? Author: Harold Averkamp, CPA, MBA Definition of Variable Expense An expense is variable when its total amount changes in proportion to the change in sales, production, or some other activity....
is the weakness of traditional cost allocations? How can a manufacturer determine the precise cost of its products? What is an independent variable? Why does a cost system developed for inventory valuation distort...
Costs that have both a fixed and variable component. For example, the cost of operating an automobile includes some fixed costs that do not change with the number of miles driven (e.g., operating license, insurance,...
Within a reasonable range of activity, the slope of the cost line is the variable rate, which is often denoted as ‘b’ in the straight line y = a + bx.
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