Slide 1 ___________________________________ 4.1 T ype s of Cost - PDF document

Slide 1 ___________________________________ 4.1 T ype s of Cost Patte rns o Cost Be havior Patte r ns ___________________________________ o Va ria ble o F ixe d o Mixe d or se mi- varia ble ___________________________________ o Cost Str uc tur e o Ac tivity Ba se or c ost dr ive r ___________________________________ o Common a c tivity ba se s o Dire c t labor hours, ma c hine hours, dire c t la bor c ost, units produc e d o Othe r le ss c ommon ac tivity ba se s ___________________________________ o Mile s drive n by sale spe rsons, number of invoic e s ma iled out by the ac c ounts rec e iva ble de pa rtme nt, numbe r of surve y c a lls made by a marketing re se a rc h firm, number ___________________________________ of oc c upie d be ds in a hospita l 2005 K D Ha the wa y-Dia l ___________________________________ Slide 2 ___________________________________ T r ue Var iable vs. Ste p Var iable o T rue Variable Costs ___________________________________ o Ste p- Va r iable Costs ___________________________________ $ $ ___________________________________ ___________________________________ Ac tivity Ac tivity T r ue Va r ia ble Cost Ste p Va r ia ble Cost ___________________________________ E xhibit T 4M1~1 T rue and Ste p Variable Costs 2005 K D Ha the wa y-Dia l ___________________________________ Slide 3 ___________________________________ L ine arity Assumption o Curviline a r Cost ___________________________________ o Re le vant Rang e E c onomist Curviline a r ___________________________________ Cost F unc tion $ R e le va nt Ra ng e ___________________________________ Ac c ounta nt’s Stra ig ht line a pproxima tion ___________________________________ ___________________________________ Ac tivity Exhibit T 4M1~2 c urviline a r c ost a nd re le vant rang e 2005 K D Ha the wa y-Dia l ___________________________________

Slide 4 ___________________________________ T ype s of F ixe d Costs o Committe d F ixe d Costs ___________________________________ o F ixe d c osts diffic ult to c hang e o Commonly c a pital inve stme nt fixe d c osts ___________________________________ o T wo c harac te r istic s o L ong te rm ___________________________________ o Diffic ult to r e duc e e ve n in shor t-te r m o E xample s o De pre c iation of buildings & e quipme nt ___________________________________ o Prope rty ta xe s o Auto and prope rty insuranc e o E xe c utive sa la rie s ___________________________________ 2005 K D Ha the wa y-Dia l ___________________________________ Slide 5 ___________________________________ T ype s of F ixe d Costs o Disc r e tionary F ixe d Costs ___________________________________ o AKA manage d fixe d c osts o Shor t-te r m fixe d c osts ___________________________________ o E xample s o Adve rtising o Re se a rc h a nd de ve lopme nt ___________________________________ o E mploye e training ___________________________________ ___________________________________ 2005 K D Ha the wa y-Dia l ___________________________________ Slide 6 ___________________________________ Committe d vs. Disc r e tionar y o Planning time ta ble ___________________________________ o Committe d fixe d c osts te nd to have a long- te r m pla nning oblig ation ___________________________________ o Disc r e tionary fixe d c osts te nd to ha ve a shor t-te r m planning obligation – usua lly a single ye ar ___________________________________ o Disc re tionary fixe d c osts c a n be a djuste d in the short- te rm ___________________________________ without tre me ndous impa c t on long- te rm g oals ___________________________________ 2005 K D Ha the wa y-Dia l ___________________________________

Slide 7 ___________________________________ F ixe d Costs and the R e le vant Range o L ar g e r ste ps tha n ste p variable c osts ___________________________________ o Can’t be c ha ng e d as e asily o i.e . building le a se ___________________________________ $ R e le va nt Ra ng e ___________________________________ ___________________________________ ___________________________________ Ac tivity Exhibit T 4M1~3 fixe d c osts and the re le vant rang e 2005 K D Ha the wa y-Dia l ___________________________________