1. © 2007 Mark T. Schenkel1 Expense Forecasting ETP 3700: Entrepreneurial Financial Management Dr. Mark T. Schenkel

2. © 2007 Mark T. Schenkel2 Cost behavior 1. Variable Costs 2. Fixed Costs 3. Mixed Costs

3. © 2007 Mark T. Schenkel3 Type of ExpenseActivity Base Sales commissionsSales Materials costUnits produced Health insurance Number of employees Wages expenseNumber of hours worked Payroll tax expenseDollars of wages paid Variable Costs

4. © 2007 Mark T. Schenkel4 Figure 5-1 Variable Cost Behavior Total Variable Cost Line Total Units Produced $

5. © 2007 Mark T. Schenkel5 Fixed Costs 1. Committed fixed costs 2. Discretionary fixed costs

6. © 2007 Mark T. Schenkel6 Figure 5-2 Fixed Cost Behavior Total Fixed Costs Total Units Produced $

7. © 2007 Mark T. Schenkel7 Breakeven Fixed Cost. Variable Revenue – Variable Cost