Cost Behaviour

Posted on September 12, 2016

Cost Behavior Assignment help

Cost Behavior refers to the way by which various types of Cost Changes whenever there is a change in the production Activity. We have best experts to provide cost behavior assignment help to students. Generally there can be 3 types of cost Behavior that can be categorized in terms of their Behavior:

1) Fixed Costs:It refers to those types of Cost which does not have any change when there is a change in the productivity level. These are such types of cost which are definite to incur whether there is any production or not.

Examples of Such Cost includes Rent Cost, Salary Cost,and Depreciation Cost etc.

 

Total Fixed Cost

 

500005000050000
 

Number of Units Produced

 

100002000030000
Fixed Cost 500005000050000

This clearly shows that irrespective of Production Total Fixed Cost would always be same.

2) Variable Costs: It refers to those types of Costs which varies with the level of production. It is direct proportional to the level of production. When there is increase in the level of Production, Variable Cost will increase and when there is decrease in the level of production, Variable Cost will decrease.

 

 

Total Variable Cost

 

200004000060000
 

Number of Units Produced

 

100002000030000
Variable Cost per Unit222

 

This clearly shows that irrespective of Production Variable Cost per unit would always be same.

3) Mixed Cost, often referred as Semi-Variable Cost: Mixed Cost are basically combination of both the Components i.e. Fixed as well as Variable Cost. Mixed Cost can be best explained with the help of an example such as Telephone Bill. For Example : In case of telephone bill , even if any customer does not talk for certain time , customer is abide to pay Fixed Charges and if Customer Crosses certain time , Customer has to pay Charges in terms of additional minutes .In this example , Fixed Charge is Fixed cost and additional minutes charges are variable cost . Hence it is combination of both the cost, therefore known as Mixed Cost. Some of the very famous techniques to ascertain mixed costs are Regression Analysis, Scatter Diagram Method, High-Low method etc.

Total Cost

 

 

1500025000350004500055000
 

Number of Units Produced

 

 0 1000200030004000
Fixed Cost1500015000150001500020000
Variable Cost per unit Not Determinable10101010

When we analyze this example, it is quite clear that up to 1500 units of production total Cost is 15000 Fixed, but once the production crosses 1500 units, for every additional unit there is an additional Cost of Rest 10 per unit. Hence, this is a combination of both Fixed as well as Variable Cost, which can be termed as Mixed Cost.

Cost behaviour
Cost behaviour

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