Summary Management Accounting - Cost Behavior Analysis

Cost Behavior Analysis
howspeciecostsrespondtorangewita enotiness activity
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measuring key business activities

activity levels
may be expressed in ...
for an
activity behavior
to be
useful in cost
in the
sales revenue (retail
analysis volume
changes
,


company) level or
should be
of
activity
correlated with changes
S
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a I
i
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at -x
A
⑰ i in costs
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IIi
II
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A I I
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kilometers driven (in
trucking company/
a



* =>
km




Day(i n a e
wate
dance classes
taught (dance studio
⑧

⑧ Be->
*
U



lessons

=

, variable costs

level
costs that
vary in total
directly and
proportionately with
changes in the
activity
·




·
cost that remains the same per unit at
every
level of activity
examples direct labor (manufacturer) cost of goods sold sales commissions ,
freight-out
: :




,


(merchandiser) gasoline (airline/ trucking companies (
;




variable costs per unit
remain constant at
all levels of
activity



fixed costs
costs that remain the same in total regardless of changes in the
activity level
·




·
costs per unit
vary inversely with
activity as volume increases unit cost declines
:


,


and vice versa


examples property taxes , insurance rent
supervisory salaries depreciation buildings/equipment
:




,
on
, ,




increased of automation labor fixed costs
less
employee more
->
use and use of


and fewer variable costs ->

depreciation/lease charges increase and direct labor costs decrease