How would a knowledge of cost behavior patterns such as those above be of help to a manager in analyzing the cost structure of his or her company? A number of graphs displaying cost behavior patterns are shown below. The vertical axis on each graph represents total cost and the horizontal axisrepresents the level of activity (volume).124FPPE78101112

The question is based on the concept of cost determination and the behaviour in the cost budget. A…

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How would a knowledge of cost behavior patterns such as those above be of help to a manager in analyzing the cost structure of his or her company?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter3: Cost Behavior And Cost Forecasting

Section: Chapter Questions

Problem 41E: Examine the graphs in Exercise 3-40. Required: As explained in the chapter, cost behavior patterns...

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How would a knowledge of cost behavior patterns such as those above be of help to a manager in analyzing the cost structure of his or her company?

A number of graphs displaying cost behavior patterns are shown below. The vertical axis on each graph represents total cost and the horizontal axis
represents the level of activity (volume).
1
2
4
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Examine the graphs in Exercise 3-40. Required: As explained in the chapter, cost behavior patterns can be described as fixed, variable, semi-variable, mixed, or step function (i.e., semi-fixed) in nature. Explain the exact type of cost behavior pattern represented by each of the cost curves shown in graphs A through L. Note that some of the graphs might represent a combination of multiple cost behavior patterns.
Explain how a scatter graph is used to identify and measure cost behavior.
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Which of the following graphs illustrates how unit variable costs behave with changes in total units produced?
Using the data in P4-2 and Microsoft Excel: 1. Separate the variable and fixed elements. 2. Determine the cost to be charged to the product for the year. 3. Determine the cost to be charged to factory overhead for the year. 4. Determine the plotted data points using Chart Wizard. 5. Determine R2. 6. How do these solutions compare to the solutions in P4-2 and P4-3? 7. What does R2 tell you about this cost model?
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