Question

Cost behavior analysis focuses on a.how costs react to increases in activity levels only. b.how costs react to changes in activity level. c.how costs will change in the future. d.None of these choices are correct.

Answer 1

Answer:

b.how costs react to changes in activity level

Explanation:

Cost behavior analysis is the study of how operating cost varies with changes in production level. Management uses mathematical functions to understand how costs change relate to activity level. The costs in reference include fixed, variable, and mixed costs incurred in the manufacturing process.

Understanding cost behavior helps management in controlling and planning business costs. The analysis is useful in determining the cost, profit, volume relationship, including break-even points.