Contribution margin is one of the most important concepts in managerial accounting. It is used extensively in planning and decision making because it is much easier to use than absorption costing, especially
In the previous post about mixed cost, we stated that a mixed cost is just the sum of the variable and fixed components. This is fairly easy to deal with when we are dealing with an external cost where
As the name suggests, a mixed cost is made up of a mix of variable cost and fixed cost. A cost must have both components to be considered a mixed cost.
There are many mixed costs around us. If you look
When thinking about cost behavior, think about how the cost behaves in total. A variable cost is a cost that varies in total. The cost increases or decreases based on a related activity.
The formula for
The idea of cost behavior is one of the most important concepts in managerial accounting. Determining how a cost will behave is critical to planning, decision making and controlling. Two types of costs