{"id":193,"date":"2020-04-18T14:13:59","date_gmt":"2020-04-18T18:13:59","guid":{"rendered":"https:\/\/pressbooks.bccampus.ca\/businessmathematics\/?post_type=chapter&p=193"},"modified":"2021-06-28T12:16:28","modified_gmt":"2021-06-28T16:16:28","slug":"cost-functions","status":"publish","type":"chapter","link":"https:\/\/pressbooks.bccampus.ca\/businessmathematics\/chapter\/cost-functions\/","title":{"raw":"2.3 Cost Functions","rendered":"2.3 Cost Functions"},"content":{"raw":"
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Key Takeaways<\/p>\r\n\r\n<\/header>\r\n

Cost functions give the cost of an activity.<\/em><\/div>\r\n<\/div>\r\n \r\n\r\nThe function used as an example in this chapter, which gives cost in terms of a number of posters, has some elements typical of cost functions<\/em>. Cost functions give the cost of an activity, usually in terms of some measurement of a level of activity.\r\n\r\nThe [pb_glossary id=\"194\"]fixed cost<\/em>[\/pb_glossary] is the cost that must be paid no matter how low the measured level of activity (the cost at zero). For the posters the fixed cost was the $80.00 for artwork and set-up, since these things would have to be done even if only one poster was produced.\r\n\r\nThe [pb_glossary id=\"195\"]variable cost<\/em>[\/pb_glossary] is the part of the cost that changes with the level of activity. For linear cost functions, the variable part of the cost changes directly<\/strong> with the level of the activity. In the poster example, the variable cost is $0.11x<\/em>. The $0.11 per poster is called the variable cost per unit<\/em>. The fact that the variable cost per unit is the same for all units makes the function linear.\r\n
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Key Takeaways<\/p>\r\n\r\n<\/header>\r\n

Variable cost: that part of the cost that changes with the level of the activity<\/div>\r\n<\/div>\r\n