ECONOMICS

Detailed explanation-1: -Cost behavior analysis refers to management’s attempt to understand how operating costs change in relation to a change in an organization’s level of activity. These costs may include direct materials, direct labor, and overhead costs that are incurred from developing a product.

Detailed explanation-2: -Variable costs are costs that vary as production of a product or service increases or decreases. Unlike direct costs, variable costs depend on the company’s production volume. When a company’s production output level increases, variable costs increase.

Detailed explanation-3: -Cost behaviour is an indicator of how a cost will change in total when there is a change in some activity. In cost accounting and managerial accounting, three types of cost behaviour are usually discussed: Variable costs. The total amount of a variable cost increases in proportion to the increase in an activity.

Detailed explanation-4: -Cost behaviours break down into four expense classifications: variable, fixed, step, and mixed costs.

Detailed explanation-5: -Variable Costs Answer: This cost behavior pattern is called a variable cost. A variable cost describes a cost that varies in total with changes in volume of activity. The activity in this example is the number of bikes produced and sold.