Chapter 7. Cost Behavior: Emphasis on Flexible Budgets
Not all costs behave in the same way. Certain costs vary in proportion to changes in volume or activity, such as labor hours and machine hours. Other costs do not change, even though volume changes. An understanding of cost behavior is helpful to managers for four reasons:
Flexible budgeting
Break-even and contribution margin analysis
Appraisal of divisional performance
Short-term choice decisions
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