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    HCO 615 Module 6 - Episode 1 Transcript

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    AnanyaBandyopadhyay
    This episode introduces key terms related to cost and cost behavior. It explains that cost behavior looks at costs from both an accounting and managerial perspective. From a managerial view, managers are interested in how changes in volume affect changes in cost. The key terms discussed include: cost, volume, variable costs which change directly with volume, fixed costs which remain constant over the relevant range, total costs which is the sum of total variable and fixed costs, and average cost which is total cost divided by volume. Economies of scale is also defined as average costs declining as volume increases.

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    HCO 615 Module 6 - Episode 1 Transcript

    Uploaded by

    AnanyaBandyopadhyay
    34 views2 pages
    This episode introduces key terms related to cost and cost behavior. It explains that cost behavior looks at costs from both an accounting and managerial perspective. From a managerial view, managers are interested in how changes in volume affect changes in cost. The key terms discussed include: cost, volume, variable costs which change directly with volume, fixed costs which remain constant over the relevant range, total costs which is the sum of total variable and fixed costs, and average cost which is total cost divided by volume. Economies of scale is also defined as average costs declining as volume increases.

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    HCO 615 Module

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    This episode introduces key terms related to cost and cost behavior. It explains that cost behavior looks at costs from both an accounting and managerial perspective. From a managerial view, managers are interested in how changes in volume affect changes in cost. The key terms discussed include: cost, volume, variable costs which change directly with volume, fixed costs which remain constant over the relevant range, total costs which is the sum of total variable and fixed costs, and average cost which is total cost divided by volume. Economies of scale is also defined as average costs declining as volume increases.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    34 views2 pages

    HCO 615 Module 6 - Episode 1 Transcript

    Uploaded by

    AnanyaBandyopadhyay
    This episode introduces key terms related to cost and cost behavior. It explains that cost behavior looks at costs from both an accounting and managerial perspective. From a managerial view, managers are interested in how changes in volume affect changes in cost. The key terms discussed include: cost, volume, variable costs which change directly with volume, fixed costs which remain constant over the relevant range, total costs which is the sum of total variable and fixed costs, and average cost which is total cost divided by volume. Economies of scale is also defined as average costs declining as volume increases.

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    HCO 615 - Module 6 (Episode 1)

    Andy Rucks

    {Slide 1}

    This is Episode 1 of Module 6. This episode is titled Key Terms. There are 4 episodes in this module
    including this one.

    {Slide 2}

    When we think about cost and cost behavior we need to look at it from both an accounting and a
    managerial perspective. From an accounting perspective, costs are found in the expense section of the
    income statement. Cost behavior is the relationship between cost and volume. Volume is the
    measurement of activity as in how many and how much time.

    {Slide 3}

    From a managerial point of view the focus is on understanding a relationship between cost and volume.
    More specifically managers are interested in the underlying cost structure of an enterprise. In other
    words, how changes in volume, or activity, effect changes in cost.

    {Slide 4}

    The phrases “cost behavior” and “underlying cost structure” are synonyms.

    {Slide 5}

    In the next few slides we’ll explore a few key terms. These are by no means the entire set of terms that
    you’ll need in understanding this topic, but it will give us a good start. We’ll begin with cost. Cost is a
    resource used in the production of a specific good or service. Volume is a quantity of a resource used in
    the production of a specific service or a specific good. Volume is also sometimes termed utilization. And
    you may hear it termed from time to time as volume utilization, but that’s redundant and I will do my
    best to use one or the other, and use them interchangeably. The relevant range is the minimum and
    maximum volume of the production of a good or service and it defines the limits for which costs are
    relevant.

    {Slide 6}

    Variable costs are those costs that change in direct proportion to unit changes in volume. So as volume
    changes from one unit to the next variable cost will go up by one variable cost unit. Variable cost is
    abbreviated VC and total variable cost is abbreviated TVC. Total variable cost is the sum from one to n, i
    to n, the volume of resource i times the cost of resource i.
    {Slide 7}

    Fixed costs are those costs that remain constant over the relevant range. You may hear it from time to
    time that all costs are variable in the long run. Certainly that is true. But for a relevant range, a specific
    relevant range that is, fixed cost remains constant over that relevant range. Total fixed costs go by the
    acronym TFC. TFC is the sum from i to n of cost i, where i is a resource within a set of resources
    exhibiting fixed cost behavior.

    {Slide 8}

    Total cost, or TC, is simply the addition of total variable costs to total fixed costs. Average cost, you
    divide total cost by the volume of a good or service being produced. Economies of scale is a condition in
    which the average costs decline as volume increases within the relevant range. It’s important to seek
    and find economies of scale.

    {Slide 9}

    This is the end of Episode 1 of Module 6. Thank you for your time and attention.

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