1) Managers utilize their knowledge of cost behavior to estimate the impact of changes in operations (like changing output volume) on future profitability.
2) The traditional definition of variable cost supposes a linear relationship between cost and some measure of volume or output.
3) Both total fixed costs and fixed cost per unit are supposed to remain constant in the relevant range.
4) The high-low method is helpful in recognizing the fixed and variable components of a mixed cost.
5) However the long-term goal in a just-in-time operating environment is to approach the theoretical capacity, companies never operate at this level.
6) Service businesses don't have any overhead costs.
7) Contribution margin per unit is selling price per unit minus fixed costs per unit.