Cost behaviour

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   Cost Behavior is the way in which costs are affected by changes in the volume of output.

   The basic principle of cost behavior is that as the level of activity rises, costs will usually rise. It will       cost more to produce 2,000 units of output than it will to produce 1,000 units.

    A fixed cost is a cost which tends to be unaffected by increase or decreases in the volume of output.

    A step cost is a cost which is fixed in nature but only within certain levels of activities.

    A variable cost is a cost which tends to vary directly with the volume of output. He variable cost per unit is the same amount for each unit produced.

    A semi variable/semi-fixed/mixed cost is a cost which contains both fixed and variable components and so is partly affected by changes in the level of activity.

    The fixed and variable elements of semi variable costs can be determined by the high-low method