Cost behavior analysis : Cost behavior analysis means to study how the cost changes as the level of volume changes. Sometimes it may be fixed, it may be variable, it may be constant at certain level etc. Variable Cost: A variable cost is the cost that changes at each level and volume of activity changes. It never remains fixed in totality. It increases at consistent rate on per unit basis as the level of output increases and vice versa. Each variable cost is having cost driver such as per hour or per unit. Fixed Cost: A Fixed cost is a cost which remains same in totality with the change in activity level. It never remains fixed per unit. It remains fixed even at zero level of activity. Most fixed costs are expressed in terms of time such as per year or per month. It is having no cost driver. To determine: If we classify the cost as fixed or variable then there will be possibility that each cost incurred on individual basis may not behave as per their classification In the given question we have to explain that why we need to classify all the costs either as fixed cost or as variable cost even if the cost classified may not behave as per its classification. We have to justify the same with two arguments.

Question

Want to see the full answer?

Answer 1

Question

Chapter 21, Problem 10DQ

To determine

Cost behavior analysis : Cost behavior analysis means to study how the cost changes as the level of volume changes. Sometimes it may be fixed, it may be variable, it may be constant at certain level etc.

Variable Cost: A variable cost is the cost that changes at each level and volume of activity changes. It never remains fixed in totality. It increases at consistent rate on per unit basis as the level of output increases and vice versa. Each variable cost is having cost driver such as per hour or per unit.

Fixed Cost: A Fixed cost is a cost which remains same in totality with the change in activity level. It never remains fixed per unit. It remains fixed even at zero level of activity. Most fixed costs are expressed in terms of time such as per year or per month. It is having no cost driver.

To determine:

If we classify the cost as fixed or variable then there will be possibility that each cost incurred on individual basis may not behave as per their classification

In the given question we have to explain that why we need to classify all the costs either as fixed cost or as variable cost even if the cost classified may not behave as per its classification. We have to justify the same with two arguments.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Sp25 ACCT X CengageNOWv2 | Online teaching X exhibit 6.4.jpg 71x399) x + bw.com/ilrn/takeAssignment/takeAssignmentMain.do?inprogress=true FIFO perpetual inventory The beginning inventory at Dunne Co. and data on purchases and sales for a three-month period ending June 30 are Number Date Transaction of Units Per Unit Total Apr. 3 Inventory 25 $1,200 $30,000 8 Purchase 75 1,240 93,000 11 Sale 40 2,000 80,000 30 Sale 30 2,000 60,000 May 8 Purchase 60 1,260 75,600 10 Sale 50 2,000 100,000 19 Sale 20 2,000 40,000 < 28 Purchase 80 1,260 100,800 June 5 Sale 40 2,250 90,000 16 Sale 25 2,250 56,250 21 Purchase 35 1,264 44,240 28 Sale 44 2,250 99,000 Required: 1. Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illust first-in, first-out method. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER un Check My Work 3 more Check My Work uses remaining Q Search hp

PLEASE HELP! NOTICE. THERE ARE FIVE CELLS ON THE LEFT SIDE TO FILL. THE DROPDOWN SHOWS THE OPTIONS FOR THESE CELLS.

Calm Ltd has the following data relating tò two investment projects, only one of which mayb e s e l e c t e d :The cost of capital is 10 per cent, and depreciation is calculated using straight line method.a . Calculate for each of the project:i. Average annual accounting rate of return on average capital investedi i . Net Present Valuei l l . I n t e r n a l R a t e o f Returnb. Discuss the relative merits of the methods of evaluation mentioned above in (a).Q.4a . In the context of process costing, discuss the following concepts briefly, i . Equivalent unitsNormal lossill. Abnormal lossi v. Joint productsV . By productsb . Discuss the different types of standard costing and objectives of standard costing.