Form of Cost Funtions

Form of Cost Functions To describe the relationship between a live and its salute driver(s), managers often use an algebraic comparability called a greet function. When there is only one exist driver, the cost function is similar to the algebraic CVP relationships discussed in Chapter 2. Consider the mixed cost graphed in Exhibit 3-3 on page 96, the facilities guardianship department cost: Let We can rewrite the mixed-cost function as Y = F + VX (1) or Y = $10,000 + $5.00X This mixed-cost function has the familiar form of a straight lineâ€"it is called a linear cost function. When we graph a cost function, F is the intercept, the point on the vertical axis where the cost function begins. In Exhibit 3-3, the intercept is the $10,000 hardened cost per month. V, the protean cost per unit of activity, is the slope of the cost function. In Exhibit 3-3, the cost function slopes upward at the rate of $5 for each(prenominal) additional patient-day. In our example, we use the cost driver patient-days. How did we train this cost driver? Why not use tote up of patients or human activity of operations?

In general, how do we develop cost functions? Y = monthly facilities maintenance department cost monthly fixed maintenance cost var F V = = iable cost per patient-day X = cost-driver activity in number of patient-days per month monthly facilities maintenance department costs monthly fixed maintenance cost Introduction to instruction Accounting: Chapters 1-17, Fourteenth Edition, by Charles T. Horngren, Gary L. Sundem, William O. Stratton, David Burgstahler, and Jeff Schatzberg. Published by learner Hall. Copyright © 2008 by Pearson Education If you want to get a full essay, order it on our website: Ordercustompaper.com

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