Question

Cost behavior refers to the manner in which a.a cost is allocated to products b.a cost changes as the related activity changes c.a cost is estimated d.a cost is used in setting selling prices

Answer 1

Answer: (B) A cost changes as the related activity changes.

Explanation: Cost behaviour is a popular concept in Accounting( studied indepthly in Cost Accounting, a branch of Accounting) that deals with the relationship between cost/expenses and business activity. It tries to explain how much cost would change as a result of increase or decrease in a certain activity or activities in business, with the main aim of finding the best(optimum) combination of cost and activities. In other words, the amount of cost and activities that will yield best returns(maximum profit).

Answer 2

Answer:

The correct answer is letter "B": a cost changes as the related activity changes.

Explanation:

Cost behavior refers to changes in the total costs of changes related to such activities. Cost behavior is responsible for companies to classify costs in fixed costs (total costs do not vary even if there are changes in production), variable costs (total costs change when production changes), and mixed costs which is a combination of fixed and variables costs.  

For a business, rent is a fixed cost, whereas raw materials is a variable cost.