Briefly explain the following terms as used in cost accounting: i. Mixed costs ii. Cost behaviour iii. Incremental cost

      

Briefly explain the following terms as used in cost accounting:

i. Mixed costs

ii. Cost behaviour

iii. Incremental cost

  

Answers


Martin
i. Mixed costs
Mixed costs are costs that change in total amount when the volume of activity changes, but
not in direct proportion. They are neither fixed nor variable for they contain fixed cost and
variable cost components. They are also called semi-fixed or semi-variables costs.

ii. Cost behaviour
Cost behaviour refers to the way in which a cost changes in relation to changes in activity
level. It describes how the costs of activity inputs change with respect to changes in activity
levels. Thus, variable costs change in direct proportion to changes in volume whereas fixed
costs remain constant. Some types of fixed costs would however take the characteristics of
both variable and fixed components only changing at different levels of activity. An example
of semi-fixed costs is salaries paid to supervisors.

iii. Incremental cost
Incremental cost is defined as the difference in total cost between two alternatives in decision.
Incremental cost is directly affected by the outcome of the decision.
It is that additional cost that management decides to choose whether to incur or not while
planning for the future.
marto answered the question on February 22, 2019 at 07:12


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