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Describe the behavior of total fixed costs as the level of activity increases?
Wiki User
∙ 12y ago
as activity increases fixed costs per unit tend decrease, however the total fixed cost in a company behaves like a flight of stairs. it remains constant within a certain range as activity increase then jumps to a new level in a parallel line to the older one for a new range that is to be determined by the size of the fixed asset expansion as well as how much excess capacity the company wishes to keep
Wiki User
∙ 12y ago
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The traditional income statement organizes costs on the basis of cost behavior?
The traditional income statement organizes costs on the basis of cost behavior
How do you describe conversion cost?
Direct Labour + Overhead Costs
What is cost driver and cost pool?
Cost driver is the basic activity which increases the or utilize the cost while cost pool is that in which all costs are jointly shown for example machine setup cost is cost driver while over all overheads is cost pool.
Factors affect of distribution channel?
A distribution channel may be affected by the costs of transport and the costs of remunerating the distributors. A long distribution chain definitely increases the end cost that is passed on to the end user.
What is the Definition of semi-fixed costs?
A semi-fixed cost is fixed over a given, small range of activity, and above that level of activity, the cost suddenly jumps. It stays fixed again for a while at the higher range of activity, and when the activity moves out of that range, it jumps again. A semi-fixed cost moves upward in a step fashion, staying at a certain level over a small range and then moving to the next level quickly. All fixed costs behave this way, and a wholly fixed cost is also fixed only as long as activity remains within the relevant range. However, a semi-fixed cost is fixed over a smaller range than the relevant range of a wholly fixed cost. An example of a semi-fixed cost is the nursing staff in a hospital. If the hospital needs one nurse for every 25 patients, then each time the patient load increases by 25 patients, one additional nurse will be hired and total nursing salaries will jump by the additional nurse's salary. That is in contrast to administrative staff salaries at the same hospital, which might remain fixed until the patient load increases by 250 patients, at which point an additional admitting clerk would be needed. The administrative staff salaries are wholly fixed costs (over the relevant range), whereas the nursing staff salaries are semi-fixed costs.
Describe the behavior of unit fixed costs as the level of activity increases?
Unit Fixed Cost remain fixed up to certain range or level of activity and then it take a jump and then remain fixed for range of activity and this behaviour continues
Will total variable costs increase if the level of activity increases within the relevant range?
yes
What happens Cost driver activity level increases within the relevant range?
total fixed costs remain unchanged
How would you describe a budgeted cost?
Budgeted costs are generally described as the best estimate about what should be allowed for forthcoming activity.
How would you describe an activity-based budget?
Activity-based budgeting is a technique that focuses on costs of activities or cost drivers necessary for production and sales. Such an approach facilitates continuous improvement.
How would you describe an activity based budget?
Activity-based budgeting is a technique that focuses on costs of activities or cost drivers necessary for production and sales. Such an approach facilitates continuous improvement.
What is the importance of cost behavior.?
Cost behaviour is associated with learning how costs change when there is a change in an organization's level of activity. The costs which vary proportionately with the changes in the level of activity are referred to as variable costs. The costs that are unaffected by changes in the level of activity are classified as fixed costs. The understanding of cost behaviour is very important for management's efforts to plan and control its organization's costs. Budgets and variance reports are more effective when they reflect cost behaviour patterns. The understanding of cost behaviour is also necessary for calculating a company's break-even point and for any other cost-volume-profit analysis.
What are the stages of accounting for costs?
direct costs,indirect costs,sunk costs, Activity based costing.
The traditional income statement organizes costs on the basis of cost behavior?
The traditional income statement organizes costs on the basis of cost behavior
The law of increasing costs means that when an economy increases the production of one item .?
what law of increasing costs means that when an economy increases the production of one item _____.
Why it is necessary to classify cost by behavior?
It is necessary when making decisions to classify costs by behaviour as you need to know how costs and revenues vary with different levels of activity/volume.Variable costs change with the level of activity. For example, doubling volume would double the variable costs. An example of a variable cost would be direct labour, direct materials within manufacturing.Fixed costs remain the same over a wide range of activity for a specified time period. An example of a fixed cost is rent, supervisors' salary, insurance, etc.Step-Fixed costs are costs which are fixed within specific activity levels. For example, if a supervisor can only supervise 100 people when there are more than a 100, then another supervisor needs to be hired. This can be a step increase or decrease depending on the change in activity levels.Semi-Variable costs (Mixed costs) have a variable and a fixed component. For example, telephone line may have a fixed line rental with a variable metered call.Therefore, knowing the differences between the costs can allow you to calculate future costs and revenues relevant to different decisions.
What of the following is the most direct cause of cost push inflation?
Rising production costs.
