英文成本管理会计chapter03

CHAPTER 3

ACTIVITY COST BEHAVIOR

QUESTIONS FOR WRITING AND DISCUSSION

1. Knowledge of cost behavior allows a man-ager to assess changes in costs that result from changes in activity. This allows a man-ager to assess the effects of choices that change activity. For example, if excess ca-pacity exists, bids that at least cover variable costs may be totally appropriate. Knowing what costs are variable and what costs are fixed can help a manager make better bids. 2. The longer the time period, the more likely

that a cost will be variable. The short run is a period of time for which at least one cost is fixed. In the long run, all costs are variable. 3. Resource spending is the cost of acquiring

the capacity to perform an activity, whereas resource usage is the amount of activity ac-tually used. It is possible to use less of the activity than what is supplied. Only the cost of the activity actually used should be as-signed to products. 4. Flexible resources are those acquired from

outside sources and do not involve any long-term commitment for any given amount of resource. Thus, the cost of these resources increases as the demand for them increas-es, and they are variable costs (varying in proportion to the associated activity driver). 5. Committed resources are acquired by the

use of either explicit or implicit contracts to obtain a given quantity of resources, regard-less of whether the quantity of resource available is fully used or not. For multiperiod commitments, the cost of these resources essentially corresponds to committed fixed costs. Other resources acquired in advance are short term in nature and essentially cor-respond to discretionary fixed costs. 6. Committed fixed costs are those incurred for

the acquisition of long-term activity capacity and are not subject to change in the short run. Annual resource expenditure is inde-pendent of actual usage. For example, the cost of a factory building is a committed fixed cost. Discretionary fixed costs are those incurred for the acquisition of short-term activity capacity, the levels of which can be altered quickly. In the short run, resource

expenditure is also independent of actual ac-tivity usage. An engineer’s salary is an ex-ample of such an expenditure.

7. A variable cost increases in direct proportion

to changes in activity usage. A one-unit in-crease in activity usage produces an in-crease in cost. A step cost, however, in-creases only as activity usage changes in small blocks or chunks. An increase in cost requires an increase in several units of activ-ity. When a step cost changes over relatively narrow ranges of activity, it may be more convenient to treat it as a variable cost. 8. A step cost with narrow steps can be treated

as variable, while one with wide steps is typ-ically treated as fixed. 9. An activity rate is the resource expenditure

for an activity divided by the activity’s prac-tical capacity. 10. Mixed costs are usually reported in total in

the accounting records. How much of the cost is fixed and how much is variable is un-known and must be estimated. 11. A scattergraph allows a visual portrayal of

the relationship between cost and activity. It reveals to the investigator whether a rela-tionship may exist and, if so, whether a li-near function can be used to approximate the relationship. 12. Managers can use their knowledge of cost

relationships to estimate fixed and variable components. A scattergraph can be used as an aid in this process. From a scattergraph, a manager can select two points that best represent the relationship. These two points can then be used to derive a linear cost for-mula. The high-low method tells the manag-er which two points to select to compute the linear cost formula. The selection of these two points is not left to judgment. 13. Because the scatterplot method is not re-stricted to the high and low points, it is poss-ible to select two points that better represent the relationship between activity and costs, producing a better estimate of fixed and va-