Capacity fixed costs:
The fixed costs of being able to achieve a desired level of production or to provide a desired
level of service while maintaining product or service attributes such as quality.
Rent/lease/taxes
Committed fixed costs:
Costs arising from the possession of facilities, equipment, and a basic organization.
Rent, rented machines, depreciation, insurance, and employees with long term
contracts
Discretionary fixed costs:
Costs determined by management as a part of periodic planning process in order to meet the
organization’s goals. They have no obvious relationship with levels of capacity or output activity.
Cost measurement:
Estimating or predicting costs as a function of appropriate cost drivers.
Activity analysis:
The process of identifying appropriate cost drivers and their effects on the costs of making a
product or service.
Engineering analysis:
The systematic review of materials, supplies, labor, support services, and facilities needed for
products and services; measuring cost behavior according to what cost should be, not what costs
have been.
In order to compute the variable cost of a table or graph, we use the High-low method:
Δy
Vc.¿ Δx
Basically:
Change in cost / change in activity
The fixed costs of being able to achieve a desired level of production or to provide a desired
level of service while maintaining product or service attributes such as quality.
Rent/lease/taxes
Committed fixed costs:
Costs arising from the possession of facilities, equipment, and a basic organization.
Rent, rented machines, depreciation, insurance, and employees with long term
contracts
Discretionary fixed costs:
Costs determined by management as a part of periodic planning process in order to meet the
organization’s goals. They have no obvious relationship with levels of capacity or output activity.
Cost measurement:
Estimating or predicting costs as a function of appropriate cost drivers.
Activity analysis:
The process of identifying appropriate cost drivers and their effects on the costs of making a
product or service.
Engineering analysis:
The systematic review of materials, supplies, labor, support services, and facilities needed for
products and services; measuring cost behavior according to what cost should be, not what costs
have been.
In order to compute the variable cost of a table or graph, we use the High-low method:
Δy
Vc.¿ Δx
Basically:
Change in cost / change in activity
