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

Explain the product life cycle costing, Product life cycle costing It i...

Product life cycle costing It is an approach used to give a long term picture of product line profitability feedback on the effectiveness of life cycle planning and cost data t

Make or buy, The Rohr Company’s old equipment for making subassemblies is w...

The Rohr Company’s old equipment for making subassemblies is worn out. The company is considering two courses of action: (a) Completely replacing the old equipment with new equipme

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

150 to 200 words, solutions for (POS) slow printing of sales tickets and un...

solutions for (POS) slow printing of sales tickets and unpredictable action of cash drawers. when credit approvals delayed the checkout process or when the computer was down, thus

What are the principles of management accounting, What are the Principles o...

What are the Principles of management accounting? 1. The procedures and methods to be followed for keeping and analyzing financial statements should have consistency. It enable

Abc analysis-pareto analysis, ABC Analysis (Pareto Analysis) In ordinar...

ABC Analysis (Pareto Analysis) In ordinary parlance, ABC analysis can be best compared with our class society where the population is categorized into Top, Middle and Lower cla

Quadratic loss function, Consider the following quality data for three diff...

Consider the following quality data for three different manufacturers of automobile weather-strips: Weather-strip Bulb Dimension Specification y=20 +or- 4mm

Queuing problems, Queuing problems There are two main approaches to que...

Queuing problems There are two main approaches to queuing problems: •    simulation •    queuing theory formula Where simple situations apply, queuing theory should be used

Lowering the average ticket price by 10 percent, Airlines give away million...

Airlines give away millions of tickets each year through their frequent flyer programs, with the typical airline awarding a free ticket for each 25,000 miles flown on the airline.

Job Order Costing, Salialailai Ltd manufactures water tanks for different s...

Salialailai Ltd manufactures water tanks for different sizes for use by industrial customers. The company uses a job costing system, in which manufacturing overhead is applied on t

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