1. What is cost behavior?
Why is it important for managers to understand cost behavior?
Identify basic cost behavior patterns and explain how changes in activity level affect total cost and unit cost?
2. Indicate which of the following costs are classified as mixed or step costs.
a. Electrical charge for the month
b. Factory overhead
c.Wages of quality control employee who gets paid a bonus for every 10 defects found
d. Charges for an employee development seminar where the cost includes a speaker fee and cost of supplies for each attendee
3. Walker Boat Company produces bass boats. The following comments were found in the “Discussion and Analysis” section of the annual report’s.
“Bass boat production includes a significant amount of robotic manufacturing costs, which do not vary with production levels."
a.What effect would the change in level of boats produced have on the total robotic costs?
b.What effect would the change in level of boats produced have on the unit costs of the boats?
Cost behavior is an indicator of how a cost will change in total when there is a change in some activity. In cost accounting and managerial accounting, three types of cost behavior are usually discussed: Variable costs. The total amount of a variable cost increases in proportion to the increase in an activity. Analyzing