Forums Accounting What is Cost behavior?

Viewing 2 posts - 1 through 2 (of 2 total)
• Author
Posts
• #16672

What is Cost behavior?

#16673

Fixed Cost- Fixed cost refers to that cost which also incurs at zero production and which doesn’t change in relation to change in quantity. For example, Gym membership amount is fixed. Even if the person goes there or not, it will incur.

Fixed cost is represented by F.

In business, there are many examples of fixed costs. The cost of a building or equipment and the cost of equipment are typically considered to be variable because a specific amount is spent, and the amount of activity follows.

Variable Cost- Variable cost refers to that cost which changes with the change in production. Average cost per unit remains constant because it varies in direct proportion.

Total Variable Cost = Variable Cost per unit X Units of a product

Mixed Cost- Mixed cost refers to that type of cost which is both variable and fixed in nature. It is also known as the semi-variable cost. This means that a mixed cost increases as quantity increases, but not proportionately. The average cost per unit decreases (eventually approaching the variable cost per unit) as quantity increases.

Total mixed cost = Variable Cost per unit X Units of a product + Fixed Cost

Viewing 2 posts - 1 through 2 (of 2 total)

You must be logged in to reply to this topic.