5-1

The Activity Base

Units
Machine
produce
hours
d
11th Edition A measure of what
Chapter 5 causes the
incurrence of a
variable cost

Miles Labor
driven hours

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True Variable Cost Example

A variable cost is a cost whose total dollar amount

varies in direct proportion to changes in the activity
Cost Behavior: level. Your total long distance telephone bill is
Analysis and Use based on how many minutes you talk.
Total Long Distance
Telephone Bill

Chapter Five

Minutes Talked
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Types of Cost Behavior Patterns Types of Cost Behavior Patterns

Recall the summary of our cost behavior Recall the summary of our cost behavior
discussion from an earlier chapter. discussion from an earlier chapter.

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