Cost Behavior Analysis and Use Cost Behavior

Machine Translated by Google MAIN SUBJECT 2 COST BEHAVIOR ANALYSIS AND USE COST BEHAVIOR Cost trends or cost reactions to changes in the volume of activity within Some companies have changed and some have remained the same. For example, insurance costs, though the company's volume of activity changes these costs remain unchanged. On the other hand, raw material costs will change when the volume of production activity changes. This charge reaction is called cost behavior. Cost behavior consists of three types, namely: 1. Variable costs 2. Fixed costs 3. Mixed costs VARIABLE COSTS Total Variable Cost Variable costs are costs that change in total proportionately changes in the volume of company activity. As an example consider the following data: Number of motorcycle products 100 units Total Machine Cost $20,000,000 $200,000 change per unit 200 unit $ 40,000,000 $200,000 per unit 300 unit $ 60,000,000 $200,000 per unit 400 unit $ 80,000,000 $200,000 per unit Total machine costs increased proportionately ($200,000 per unit) as reaction to the increase in the number of motorcycle products. If depicted graphically, then the number of motorcycles is the activity base or cost driver (X), while the total cost of the machine is Variable cost. 10 Machine Translated by Google Graph 2.1. Changes in total variable cost $ 200,000/unit $ 80,000,000 60,000,000 Total Machine Cost 40,000,000 20,000,000 100 200 300 400 unit 0 Number of motorcycle products If indicated by the equation, then: Y = b X ; b= $200,000 so Y = 200,000 X Description: Y = Total Machine Cost X = Number of motorcycle products True Variable Cost dan Step Variable Cost The graph above shows the true variable cost or proportionately variable cost, ie costs that change proportionately. Meanwhile, step variable costs are costs that change gradually. These costs change if there is a large change in activity. The example is indirect labor costs. If drawn graphically, the step variable cost is as follows: Graph 2.2. Changes in step variable costs $ T otal indirect labor cost activity volume 11 Machine Translated by Google Linearity and Relevant Range Assumptions Actually, the total true variable cost graphic image is not exactly a straight line or linear, but more in the form of a curve, but still with a tendency for costs to increase exponentially proportional to the volume of activity. The graph is perfectly straight only on volume certain is called the relevant range. Graph 2.3. Changes in step variable costs $ Relieve Range cost activity volume Variable Cost Per Unit The variable cost per unit is fixed, as in the example above, the price/cost of the machine per unit motorcycle product is $200,000. If drawn with a graph it will look as following: Graph 2.4. Changes in variable cost per unit $ 400,000 300,000 200,000 Machine Cost per unit of Bicycle 100,000 0 100 200 300 400 unit Number of Motorcycle Products 12