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UWSP - ACCT 212 - Class Notes - Week 3

Created by: Jenna Gajewski Elite Notetaker

UWSP - ACCT 212 - Class Notes - Week 3

School: University of Wisconsin - Stevens Point
Department: Accounting
Course: Managerial Accounting I
Term: Spring 2019
Tags: cost, behavior, and Forecasting
Name: Accounting Week 3 Lecture Notes
Description: Chapter three covers Cost Behavior and Forecasting including all of the methods and equations
Uploaded: 02/09/2019
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background image Accounting 211 Week 3 Lecture Notes Chapter 3: Cost Behavior and Forecasting Cost behavior: - The foundation upon which managerial accounting is built - Describes whether a cost changes when the level of output changes - Variable costs: changing costs (vary by units produced) o Cost driver: casual factor that measures the output of the activity  that leads or causes costs to change Ex. weather for an airline company Helps to predict and control costs - Fixed costs: costs that stay the same  o Fixed cost / units produced  Varies inversely by number of units produced  Only fixed for a certain period of output o Discretionary fixed Cost Fixed amount that doesn’t vary with production directly, but 
it can change
- Mixed costs: have changing and constant components o Y = mx + b (Y = a + bx)
o Methods for separating mixed costs
High low Find points: largest and smallest points in cost drivers Using the high and low points, calculate the variable 
rate
o Variable Rate= (High Point Cost – Low Point  Cost) /       (High Point Output – Low Point 
Output) 
Calculate the fixed cost using the variable rate and 
either the high point or low point
o Fixed cost = Total cost at high point –  (Variable Rate x Output at High Point) Form the cost formula for materials handling based on 
the high-low
o Total cost = Fixed Cost + (Variable Rate x X) Scatter-graph Method  Plot points on a graph so the relationship between 
materials handling costs and activity output can be 
seen
Inspect the graph to reveal outliers to justify 
elimination for a better estimate 
Visually fit a line to the data points

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School: University of Wisconsin - Stevens Point
Department: Accounting
Course: Managerial Accounting I
Term: Spring 2019
Tags: cost, behavior, and Forecasting
Name: Accounting Week 3 Lecture Notes
Description: Chapter three covers Cost Behavior and Forecasting including all of the methods and equations
Uploaded: 02/09/2019
2 Pages 36 Views 28 Unlocks
  • Better Grades Guarantee
  • 24/7 Homework help
  • Notes, Study Guides, Flashcards + More!
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