The Behavior Cost
Cost-Volume Relationship – how costs behave as the level of activity changes * Variable Cost – are items of cost that vary, in total, directly and proportionately with volume. * Fixed Cost – are items of cost that, in total, do not vary at all with volume * Semi-Variable Cost – are those costs that include a combination of variable and fixed costs items. * Break-Even – total costs equal total revenue * Margin of Safety – amount or ratio by which the current volume exceeds the break even volume.

:. Total variable costs change in direct proportion with volume, whereas unit variable cost is a constant. Total fixed costs do not vary with volume, but unit fixed cost decreases as volume increases.

Inherent Conditions * Relevant Range a range that is relevant for the situation being analyzed. * Relevant time period is the time period which cost behavior is being estimated. * Stickiness of Cost primarily because managers tend to increase resources more readily when volume increases than they reduce them when volume decrease. * Environment influences

Profitgraph – shows the expected relationship between total costs and revenue at various volumes.

Break-even analysis
:. Total Revenue =Total Cost
Target Profit = total fixed costs + target profit Unit contribution margin
Break even in sales unit = Total Fixed Cost UP – UVC
Break even in sales dollars = fixed costs Contribution percentage
Or

Break even units * Unit Selling Price
Contribution margin = unit price – unit variable cost
Contribution margin percentage = unit price – unit variable cost unit price
Four basic ways in which the profit of a business that makes a single product can be increased: 1. Increased selling price per unit (UR) 2.