Chapter 2 Flashcards
1
Q
Fixed cost behaviour
A
When activity increases/decreases:
Total fixed costs stays constant
Fixed cost per unit decreases/increases
2
Q
Variable costs behaviour
A
Total variable costs increases are units sold increases
Variable costs per unit stay constant
3
Q
What are mixed costs?
A
Have factors of both fixed and variable components
4
Q
What is the relevant range?
A
The range of activity
5
Q
What is the operating leverage?
A
A measure of the extent to which fixed costs are being used in an organization
Contributed margin/net income
6
Q
What is the format of an income statement under the contribution margin approach?
A
Sales revenue
- Variable costs
Contribution margin
- Fixed costs
Net income
7
Q
How do you calculate predetermined overhead rate?
A
Budgeted overhead/expected activity
