acca-f2 - cost behavior

Cost behaviour is the way in which costs are affected by changes in the volume of output.

fixed cost is a cost which tends to be unaffected by increases or decreases in the volume of output

fixed costs always have a variable element, since an increase or decrease in production may also bring about an increase or decrease in fixed costs

step cost is a cost which is fixed in nature but only within certain levels of activity.

esempio:
consider the depreciation of a machine which may be fixed if production remains below 1,000 units per month.
If production exceeds 1,000 units, a second machine may be required, and the cost of depreciation (on two machines) would go up a step.
A sketch graph of a step cost could look like this.

variable cost is a cost which tends to vary directly with the volume of output

If the relationship between total variable cost and volume of output can be shown as a curved line on a graph, the relationship is said to be curvilinear

semi-variable costs is a cost which contains both fixed and variable components and so is partly affected by changes in the level of activity

esempi:

Electricity and gas bills

Fixed cost → tanding charge
Variable cost → charge per unit of electricity used

Salesman's salary

Fixed cost → basic salary
Variable cost → commission on sales made

Costs of running a car

Fixed cost → road tax, insurance
Variable costs → petrol, oil, repairs (which vary with miles travelled)

other cost behaviour patterns

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