Cost behavior-cost drivers , Managerial Accounting

Assignment Help:

Cost Behavior

A firm's cost position results from the cost behavior of its value activities. The cost behavior is based on a number of structural factors which influence cost, which I term cost drivers. Numerous cost drivers can combine to determine the cost of a given activity. The significant cost driver or drivers can vary among firms in the similar industry if they employ different value chains. A firm's relative cost place in a value activity depends on its standing vis-à-vis important cost drivers.

Cost Drivers

Ten major cost drivers determine the cost behavior of value activities: economies of scale, learning, and the pattern of capacity utilization, interrelationships, linkages, integration, timing, optional policies, position, and institutional factors. Cost drivers are the structural causes of the cost of an activity and can be more or less under a firm's control. Drivers frequently interact to establish the cost behavior of a specific activity, and the associative impact of cost drivers will vary widely among value activities. Thus no one cost driver, such as scale or the learning curve is ever the sole determinant of a firm's cost position. Diagnosing the cost drivers of each value activity permits a firm to gain a complicated understanding of the sources of its relative cost position and how it may be changed.


Related Discussions:- Cost behavior-cost drivers

Classification of ratio according to significance, Classification of ratio ...

Classification of ratio according to significance   The ratios have also been classified according to their significance. Some ratios are more important than other and the fir

Explain the break even point pricing, Break even point or B.E.P. pricing me...

Break even point or B.E.P. pricing method : Break even point is the volume of sales at which the total sale revenue of the product is equal to its total cost. In other words, it

Explain direct labor cost standard, Explain Direct labor cost standard ...

Explain Direct labor cost standard The setting up of standard labor cost for each product would require: a) The determination of budgeted fixed overhead for a period b) B

Security analysis and portfolio management, Security Analysis and Portfolio...

Security Analysis and Portfolio Management Define Capital Market Line and how is it dissimilar from Security Market Line. Describe with illustrations?

Credit standards, This variable deals along with the granting of credit. On...

This variable deals along with the granting of credit. On one great all the customers are granted credit and conversely, none of them are granted credit irrespective of their credi

Lease accounting, question:lease accounting implicit rate unknown,20%increm...

question:lease accounting implicit rate unknown,20%incremental rate leaseterm 4 years,find implicit rate using trial and error method.i know nothing about trial and error method in

Estimate a demand function and forcast demand, Question 1: Assuming tha...

Question 1: Assuming that you are appointed consultant on economic matters for a company and you are asked to analyse the market structures in various sectors of the economy.

Absorption cost-variable cost-transfer pricing methods, Absorption cost ...

Absorption cost Absorption, or full cost systems, transfer the full cost of the supplying department to the receiving department. Where a profit is to be allowed to the supplyi

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd