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

Calculate earnings per share, EMERALD LTD is planning an expansion programm...

EMERALD LTD is planning an expansion programme,which will require Rs 30 crores & can be funded through one of the following 1.issue further equity share of Rs 100 each at par.

Capital budgeting – planning investments, Project C would involve a current...

Project C would involve a current outlay of $50,000 on equipment and $15,000 on working capital. The investment in working capital would be increased to $21,000 at the end of the f

Classification of costs, discuss which of the cost classification is suitab...

discuss which of the cost classification is suitable for LunchBreak LTD and why?

Input-exogenous variables, Input or exogenous variables These are varia...

Input or exogenous variables These are variables of two types: 1) Controlled variables: These are variables that can be controlled by management. By changing the input

Assignment, What is the fastest time financial accounting assignment can be...

What is the fastest time financial accounting assignment can be done by your company? It will be a report type format but overview type without going into depth.

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

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

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

C-v-p analysis under uncertainty, C-V-P ANALYSIS UNDER UNCERTAINTY A ma...

C-V-P ANALYSIS UNDER UNCERTAINTY A major limitation of the basic C.V.P analysis is the assumption that the unit variable cost, selling price and the fixed costs are constant an

Evaluate marginal cost, 1. If the marginal cost of producing a good is incr...

1. If the marginal cost of producing a good is increasing as a firm produces more of the good, then which of the following must be true? a. AFC is rising               b. AVC i

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