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| Mgt402 gdb 1 Solution Fall 2022 |
Activity level
The
activity level refers to the amount of work done, or the number of events that
have occurred. Depending on circumstances, the level of activity may refer to
the volume of production in aperiod, the number of items sold, the value of
items sold, the number of invoices issued, the number of invoices received, the
number or units of electricity consumed, the labor turnover etc.
Basic principle
The
basic principle of cost behavior is that as the level of activity rises, costs
will usually raise. For example; it will cost more to produce 500 units of
output than it will cost to produce 100 units; it will usually cost more to
travel 10 km than to travel 2 km. Although the principle is based on the common
sense, but the cost accountant has to determine, for each cost elements,
whether which cost rises by how much by the change in activity level.
Cost Accounting:
It
is the establishment of budgets, standard cost and actual costs of operations,
processes, activities or products and the analysis of variances, profitability
or social use of funds. It involves a careful evaluation of the resources used
within the business. The techniques employed are designed to provide financial
information about the performance of a business and possibly the direction
which future operations should take.
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