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Transcript of © 2007 Mark T. Schenkel1 Expense Forecasting ETP 3700: Entrepreneurial Financial Management Dr....
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© 2007 Mark T. Schenkel 1
Expense ForecastingETP 3700: Entrepreneurial Financial ManagementDr. Mark T. Schenkel
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© 2007 Mark T. Schenkel 2
Cost behavior
1. Variable Costs
2. Fixed Costs
3. Mixed Costs
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© 2007 Mark T. Schenkel 3
Type of Expense Activity BaseSales commissions SalesMaterials cost Units producedHealth insurance Number of employeesWages expense Number of hours workedPayroll tax expense Dollars of wages paid
Variable Costs
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© 2007 Mark T. Schenkel 4
Figure 5-1
Variable Cost Behavior
Total Variable Cost Line
Total Units Produced
$
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© 2007 Mark T. Schenkel 5
Fixed Costs
1. Committed fixed costs
2. Discretionary fixed costs
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© 2007 Mark T. Schenkel 6
Figure 5-2
Fixed Cost Behavior
Total Fixed Costs
Total Units Produced
$
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© 2007 Mark T. Schenkel 7
Breakeven
Fixed Cost .
Variable Revenue – Variable Cost