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- It is where costs are classified in relation to their behaviour as activity level changes.
a) Fixed labour costs are costs of remuneration for employees efforts and skills which does not change with activity level e.g. a case where worker is paid a weekly irrespective of the output achieved.
b) Variable labour costs are costs of remuneration for employees? effort and skills which depend on the level of output achieved e.g. where wages are paid at a rate per unit produced. Labour cost behaviour is important when considering its relevancy in:
i. Quantification of future business plans.
ii. Control of the operations of the business.
iii. Making of decisions about future operations of the business.
Wilfykil answered the question on August 5, 2019 at 12:42
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