COST ACCOUNTING
COST BEHAVIORS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Cost behaviour examines how costs respond to changes in the level of output or activity. Costs can behave in one of several ways, including as fixed costs, variable costs and semi-variable costs.
|
|
|
An understanding of cost behaviour can be used to enable the calculation of total costs and unit costs using simple arithmetic.
|
|
|
The high-low method can be used to analyse semi-variable costs at two activity levels into the variable and fixed parts. This information can then be used to calculate the total costs at other activity levels.
|
|
|
The high low method enables you to calculate net wages.
|
|
|
An understanding of cost behaviour can be used to enable the calculation of gross and net profit.
|
Detailed explanation-1: -High-low method formula First you calculate the variable cost component and fixed cost component, then plug the results into the cost model formula. Once you have the variable cost per unit, you can calculate the fixed cost.
Detailed explanation-2: -Hi-low is linked to the idea of cost behaviour and is one method for splitting semi-variable costs into their fixed and variable elements. Making a distinction between fixed and variable costs in a semi-variable cost might be used: in product costing. to analyse profitability of a product or department.
Detailed explanation-3: -False – the high-low method uses the costs associated with the highest and lowest activity points, regardless of whether these costs are the highest or lowest costs for any data point.
Detailed explanation-4: -The high-low method is used to calculate the variable and fixed cost of a product or entity with mixed costs. It takes two factors into consideration. It considers the total dollars of the mixed costs at the highest volume of activity and the total dollars of the mixed costs at the lowest volume of activity.