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 concepts of costs, Explain the concepts of costs. A cost ac...

Explain the concepts of costs. A cost accountant is mainly concerned with the following cost concepts. 1. Concept of objectives: it is this concept that gives direction to

Planning-role of management accountant , Planning Planning is the funda...

Planning Planning is the fundamental function of the management by means of which the managers decide: What goals are to be accomplished How they will be accomplished.

Questions., how long will it take to get answers after question are submitt...

how long will it take to get answers after question are submitted

HW, Raner, Harris, & Chan is a consulting firm that specializes in informat...

Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one in Chicago and one in Minneapolis. T

Ilustrate the debt equity ratio, Debt equity ratio Meaning: this rati...

Debt equity ratio Meaning: this ratio establishes a relationship among long term debts and share holders funds. Objective: the objective of computing this ratio is to me

What are the advantages of ratio analysis, Advantages of ratio analysis ...

Advantages of ratio analysis 1) Helpful in financial analysis: financial analysis is easier if accounting ratios are used to analyze the different financial statement relatio

Case of variable quantity-discounts structures, The case of variable quanti...

The case of variable quantity discounts In practice, suppliers may offer different discounts for different quantities purchased. For illustration:    Segment        Quantity

Calculate the eoq, Calculate the EOQ An agent supplies 1000 units per ...

Calculate the EOQ An agent supplies 1000 units per calendar month (PCM) OF A PRODUCT TO CONSUMER. The cost per unit is £175 and the amount cost of storage space is £40. Associ

[email protected], Why might managers favour this ABC system instea...

Why might managers favour this ABC system instead of the older system that allocated all MOH costs on the basis of direct? labour?

Moore company uses process costing, Moore Company uses process costing.  Th...

Moore Company uses process costing.  The following information was available for October: During October, 1,000 units were started, and costs incurred during the month were

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