Finance and accountng Chapter 20 samenvatng
LO20-1 Explain how fxxed variablxd ane sxmi variablx costs rxspone to changxs in thx volumxs of
businxss actvitt
Fixed costs (fxed expenses) remain unchanged despite changes in sales volume, while variable costs
(or expenses) change in direct proporton to changes in sales volume. With a semivariable cost, part
of the cost fxed, and part is variable. Semi variable costs in response to a change in the level of
actvity, but they change by less than proportonate amount.
Fixed costs Costs and expenses that remain unchanged despite changes in the
level of the actvity base (rent, internet, insurance)
Semivariable costs Costs and expenses that respond to changes in the level of the actvity
base than proportonate amount (variable change per kilowat hour
used)
Variable costs Costs and expenses that vary directly and proportonately with change
in the level of actvity base (materials used, food consumed)
LO20-2 Explain how xconomixs of scalx can rxeucx unit costs
Economies of scale are reductons in unit costs that can be achieve through a higher volume of
actvity. Onne economy scale is fxed costs that are spread over a large number of units, thus reducing
unit costs.
Sales revenue
COGS−¿
¿
Gross profit /loss(contrubution margin) ¿
¿
¿ costs
BEP per unit =
contributionmargin per unit
Economies of scale A reducton in unit cost achieved through a higher volume of output
(opposite diseconomies of scale)
Relevant range The span or range of output over which output is likely to vary and
assumptons about cost behaviour are generally valid. Excludes
extreme volume variatons.
Break-even-point The level of sales at which a company neither earn an operatng
proft nor incurs as loss. eevenue exactly covers costs and expenses
LO20-1 Explain how fxxed variablxd ane sxmi variablx costs rxspone to changxs in thx volumxs of
businxss actvitt
Fixed costs (fxed expenses) remain unchanged despite changes in sales volume, while variable costs
(or expenses) change in direct proporton to changes in sales volume. With a semivariable cost, part
of the cost fxed, and part is variable. Semi variable costs in response to a change in the level of
actvity, but they change by less than proportonate amount.
Fixed costs Costs and expenses that remain unchanged despite changes in the
level of the actvity base (rent, internet, insurance)
Semivariable costs Costs and expenses that respond to changes in the level of the actvity
base than proportonate amount (variable change per kilowat hour
used)
Variable costs Costs and expenses that vary directly and proportonately with change
in the level of actvity base (materials used, food consumed)
LO20-2 Explain how xconomixs of scalx can rxeucx unit costs
Economies of scale are reductons in unit costs that can be achieve through a higher volume of
actvity. Onne economy scale is fxed costs that are spread over a large number of units, thus reducing
unit costs.
Sales revenue
COGS−¿
¿
Gross profit /loss(contrubution margin) ¿
¿
¿ costs
BEP per unit =
contributionmargin per unit
Economies of scale A reducton in unit cost achieved through a higher volume of output
(opposite diseconomies of scale)
Relevant range The span or range of output over which output is likely to vary and
assumptons about cost behaviour are generally valid. Excludes
extreme volume variatons.
Break-even-point The level of sales at which a company neither earn an operatng
proft nor incurs as loss. eevenue exactly covers costs and expenses
