Question

Cost behavior ______. categorizes costs as fixed, mixed and variable is a detailed analysis technique used to determine whether costs are fixed or variable refers to how a cost will change as activity level changes is the relative proportion of each type of cost in an organization

Answer 1

Answer:

The correct option is;

Refers to how a cost will change as activity level changes

Explanation:

Cost behavior is defined as the specification of the manner in which cost will vary in total in response to a change in the activity of some other factors. There are three types of cost behavior as outlined in cost accounting and managerial accounting branches of accounting including;

1) Fixed cost; The fixed cost remains the same relative to the changes in activity

2) Variable cost; The variable cost varies with an increase or decrease proportionately with the level of activity

3) Semivariable or mixed cost; Mixed cost are partially fixed cost such as the cost of gaining maintenance of a power generating plant including the purchase of fuel.

Answer 2

The cost behavior refers to how a cost will change with change in the activity level. So, the correct option that matches with the statement quoted above is C.

Cost behavior refers to how the different types of cost are affected by a even a gradual change in the activities like production, distribution, manufacturing, etc.

• Cost behavior do not affect the fixed costs of an organization as they are relative in nature and do not have much impact on the scales of operation of a business.

• The variable costs of an organization are affected when direct change is seen in the business activities like production, distribution and manufacturing, etc. These costs are subjective in nature.

• Mixed costs refer to as a fusion of of variable costs that are dependent on fixed costs that have an impact with a change in scales of operation of the business.

Hence, the correct option is C that the Cost behavior refers to how a cost will change with a change in the activity levels of the organization in a positive or a negative way.

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