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

Budgetary styles, their definitions and the advantages and disadvantages

their definitions and the advantages and disadvantages

Batch size of one-jit features, Batch size of one Set up time is the am...

Batch size of one Set up time is the amount of time needed to adjust tools and to retool for various product. Long set ups a change over time make the production of batches wit

Cash to debt service ratio, Cash to debt service ratio  Cash to debt s...

Cash to debt service ratio  Cash to debt service ratio also known as debt cash flow coverage ratio is an improvement over the interest coverage ratio and is calculated. The

EOQ, a annual sales are 585000 unit. the purchase price per unit is $2. the...

a annual sales are 585000 unit. the purchase price per unit is $2. the carrying cost is 26% of purchase price of goods safty stock is 100000 units on hand two weeks are required fo

Operating Decisions, 11.1 Process Solutions provides a computer-based docu...

11.1 Process Solutions provides a computer-based document processing service. The accountant has produced the following analysis. Standard Modified Advanced Sales quantity 1,000

Define performance budgeting according u.s. bureau of budget, Define perfor...

Define performance budgeting according U.S. bureau of budget U.S. bureau of budget defines performance budget as one which presents purposes and objectives for which funds are

Explain the going rate pricing, Going rate or follow the crowd pricing:- ...

Going rate or follow the crowd pricing:- In this method the firm price its products at the similar level as that of the competition. This method supposes that there will be no

Prepare a fixed budget and a flexible budget, Question: A company has b...

Question: A company has budgeted to produce and sell 10,000 units of a product, the selling price and the variable cost per unit of which is Rs 20 and Rs 12 respectively. Fixe

Example of cash discount, M/s ABC's present credit terms are 1/10 net 30 th...

M/s ABC's present credit terms are 1/10 net 30 that they are planning to change to 2/10 net 30.  The current average collection period is 20 days and the variable cost to sales rat

What are the requirements of a good budgeting system, Requirements of a goo...

Requirements of a good budgeting system Following are the requirement of a good budgeting system: 1) Budgeting process should be backed and supported by the chief executive

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