Managerial Accounting
Group Presentation
Chapter 5
Cost Behavior : Analysis and Use

Group Member:
Jayanti Suli F12218004
Juan Hanam F12218005
Ricwilson Horax F12218006
Richard Hendrawan F12418022

Types of Cost Behavior Patterns
Cost Structure is the relative proportion of fixed, variable and mixed costs found within an organization

1. Variable Costs

An activity base (also called a cost driver) is a measure of what causes the incurrence of variable costs. As the level of the activity base increases, the total variable cost increases proportionally. Units produced (or sold) are not the only activity base within companies. A cost can be considered variable if it varies with activity bases such as miles driven, machine hours, or labor hours.

True variable costs
As an example of an activity base, consider your total long distance telephone bill. The activity base is the number of minutes that you talk. A true variable cost is one whose total dollar amount varies in direct proportion to changes in the level of activity. On your land-line, your total long distance telephone bill is determined by the number of minutes you talk. An activity base, or cost driver, is a measure of what causes the incurrence of variable costs. As the level of activity base increases, the variable cost increases proportionally.

Variable Cost per Unit A variable cost remains constant if expressed on a per unit basis. The cost per minute talked is constant. For example, 10 cents per minute.

Example of variable cost 1. Merchandising companies – cost of goods sold. 2. Manufacturing companies – direct materials, direct labor, and variable overhead. 3. Merchandising and manufacturing companies – commissions, shipping costs, and clerical costs, such as invoicing. 4. Service companies – supplies, travel, and clerical. The Difference between True Variable