This module serves as an introduction to mixed costs. Distinctions between fixed and variable costs are important. As activity increases, total variable costs increase, but fixed costs remain the same. This is accurate within the relevant range. Activity changes outside the relevant range can result in increases in either fixed or variable costs.
After you have read the assigned textbook chapter, enter this forum to describe how the firm where you work, or any business firm, distinguishes between fixed and variable costs. Provide specific examples. In addition, explain whether fixed cost items or variable cost items get any priority in your firm’s internal decisions to distribute available funds. If you are not directly involved in managerial accounting, you may want to discuss these questions with a Chief Financial Officer and share the information with your classmates.
Some students may not want to address this discussion topic from the perspective of the firm where they work. As such, this can also be discussed from the perspective of how any firm operating in the aviation industry might address the requirements of this discussion topic.
For this Case Study, complete the three requirements below:
- ABC Airlines has calculated the total costs (fixed and variable) for the passenger service flights between Los Angeles, California and Orlando, Florida. The two methods used were the high-low method and the least squared method. Compare and contrast these two methods. Which one is the most reliable? What affect does an outlier have on the high-low method? Which method would you recommend to ABC?
- List and discuss ten possible cost drivers for an aircraft manufacturing firm.
- Refer to Case 6-46 at the end of Chapter 6.
- Compute requirement 2, except you can build or use an existing Excel Spreadsheet to calculate the fixed and variable costs of the airport’s cost behavior pattern.
- Also, complete requirement 4. The spreadsheet must accompany the submission.
For this case study, you will demonstrate your ability to correctly calculate the problem and demonstrate creative thinking by analyzing the case and answering the questions that are intended to interpret the data Please refer to the case study section of the syllabus for additional guidance and your Case Study Rubric to review the criteria that will be used to evaluate and grade your submission.This activity is due the last day of this module. If you have chosen to complete this activity as a group assignment (optional), one member of the group will submit the assignment. Include the names of all participating group members in the top left corner of the first page of the document.