EBK ACCOUNTING PRINCIPLES
EBK ACCOUNTING PRINCIPLES
13th Edition
ISBN: 9781119411017
Author: Weygandt
Publisher: WILEY
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Chapter 22, Problem 1Q

(a)

To determine

Cost Behavior Analysis: It refers to analysis of cost which tends to change with change in any business condition.

To explain: Meaning of cost behavior analysis.

(a)

Expert Solution
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Answer to Problem 1Q

Cost tends to change with change in the business condition, therefore this change in cost with respect to the business conditions is analyzed and this is known as cost behavior analysis.

Explanation of Solution

Different types of costs are incurred in the business some of them change as per the production, whereas some of the costs do not change with the change in level of production. This irregular behavior of production is referred as cost behavior.

Conclusion

Thus, cost behavior analysis is change in cost due to change in business conditions.

(b)

To determine

To explain: Importance of cost behavior analysis for management.

(b)

Expert Solution
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Answer to Problem 1Q

The importance of cost behavior analysis is as given below:

  • A proper idea of cost should be known because the cost factor decides which course of action the firm should follow.
  • Different types of costs are incurred in the business some of them changes as per the production, whereas some of the cost do not change with the change in level of production. Therefore, the price of the product totally depends on cost.

Explanation of Solution

Any kind of managerial decision or the final price of the product depends on the cost incurred in production. Therefore, cost analysis is very important factor.

Conclusion

Thus, cost behavior analysis is important for the management of the company.

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Elements of cost | Direct and Indirect: Material, Labor, & Expenses; Author: Educationleaves;https://www.youtube.com/watch?v=UFBaj6AHjHQ;License: Standard youtube license