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

Interpratation of variance, INTERPRATATION OF VARIANCE Controllability,...

INTERPRATATION OF VARIANCE Controllability, Materiality and Trend are the interpretation of variance. The point of comparing flexed budget and real figures is to see what corre

What does your analysis tell you about each firm, When the stock market is ...

When the stock market is going up over a long period of time, investors can become complacent about the risks of being a stockholder. After the significant decline of the stock mar

Cindy, School problem is asking to calculate the work in progress inventory...

School problem is asking to calculate the work in progress inventory for the beginning of a month without providing previous month data.

Draw a time line for the assembly department, Computing equivalents units a...

Computing equivalents units and assigning costs to completed units and ending work in process; no beginning inventory or cost transferred in (30 -45min) Sue Electronics makes CD

Analysis of credit file, Analysis of Credit File: Credit file is a compila...

Analysis of Credit File: Credit file is a compilation of each the relevant credit information of the customer. All the credit information collected throughout the credit informati

Procedure of material acquisition, Procedure of material acquisition A ...

Procedure of material acquisition A stores record is maintained into which the quantity and value of materials received is entered. Issues of materials to production are made b

What is zero bases budgeting, What is Zero bases budgeting (ZBB) ...

What is Zero bases budgeting (ZBB) Meaning and definition Zero base budgeting is a management tool for providing a sys tem for a careful consideration of actual in

Explain about intra company transfer pricing, Intra company transfer pricin...

Intra company transfer pricing A company engaged in production may have several segments division or departments doing production jobs or manufacturing party or fully finished

Linear Programming, Explain with examples five areas where linear programmi...

Explain with examples five areas where linear programming can be applied in Managerial accounting

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