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

Detailed explanation-3: -What is Cost Behavior? Cost behavior is the manner in which expenses are impacted by changes in business activity. A business manager should be aware of cost behaviors when constructing the annual budget, to anticipate whether any costs will spike or decline.

Detailed explanation-4: -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-5: -The business entities generally use the Scatter diagram, the High-low method, and Regression to determine the cost behavior.