Management Accounting Theory of Cost Behavior

image_32e59f0799865af7c5764dfd2ec9bc63

Management accounting contains a number of decision-making tools that require the conversion of all operating costs and expenses into fixed and variable components. The responsibility for providing this cost behavior information falls squarely upon the shoulders of the management accountant. The conversion of ordinary financial data as typically found in the general ledger accounts requires that the management accountant have a thorough understanding of cost behavior theory.  The identification and measurement of fixed and variable costs is somewhat complicated by the fact that some costs are fixed or variable at the discretion of management, while other costs are not.

Furthermore, for those expenditures that are inherently variable, management has the ability, within limits, to control the magnitude of the variable cost factors. In order to exercise this control, management also needs a solid understanding of the nature of cost behavior. In management accounting, the classification and measurement of fixed and variable cost is based on a body of knowledge that involves a number of assumptions. In many cases, the usefulness of fixed and variable cost data depends on the validity of these assumptions. In order to avoid poor operating results and faulty decision making that is likely to occur when false cost assumptions are made, the ability to recognize and measure cost behavior is essential.

The most volatile variable in any business is volume; that is, units produced or units sold. A change in volume has an immediate impact on variable costs. Variable costs are those costs that increase or decrease with corresponding changes in volume. However, the exact relationship between total variable cost and volume in practice is not always easy to describe or measure. Therefore, in both management accounting and economic theory, the relationship between volume and total variable cost is often determined by assumption.  An important point that needs understanding is that some costs are not inherently fixed or variable but become one or the other by management exercising its decision-making powers. Management has the discretionary power to make some costs either variable or fixed. For example, sales people compensation can be either fixed or variable.

If management decides to reward sales people on the basis of a commission, then sales people’s compensation is variable. If the basis for rewarding sales effort is a salary, then sales people’s compensation is a fixed expense. If factory workers are paid a wage rate, then factory workers’ compensation is variable. The decision to pay workers a salary would make the factory labor compensation a fixed cost in the short- run.  In management accounting, the relationship between activity and total variable cost is assumed to be linear. If the cost per unit of output sharply changes outside of this range of activity, then the use of a constant average cost per unit values should be avoided.

This article has been compiled by Classof1.com, a leading online Homework-Help provider.

For assistance with your academic assignments in Management Accounting, you can visit http://classof1.com/homework-help/management-accounting-homework-help

Classof1.com is open 24/7. You can call us at 1-877-252-7763 or drop an email to learning@classof1.com


Matching School Ads
  • Online degrees offered include BA in Accounting, BA in Business Administration, MBA, and more.
  • Business students may be eligible for scholarships such as the Entrepreneurship Scholarship.
  • Courses help students develop knowledge of marketing, accounting, economic principles, and financial management.
  • Business Administration students can specialize in areas such as Entrepreneurship, Finance, and Project Management.

Programs:

  • BA/Accounting
  • BA/Finance
  • BA/Sports and Recreation Management - Finance
  • And more...
  • Ranked among the Best Online Bachelor’s Programs by U.S. News and World Report in 2015.
  • Ranked among the Best Online MBA Programs by U.S. News and World Report in 2015.
  • Founded in 1890, it has a campus in Waterbury, CT and offers online degree program in eight-week modules, six times a year.
  • About 800 students are enrolled at the main campus, and about half of them commute.
  • Online courses make it possible for students to earn a bachelor’s degree in as little as 18 months and a master’s degree in 14-24 months.

Programs:

  • B.S. in Accounting
  • B.S. in Business Administration / Accounting
  • B.S. in Finance
  • And more...
  • Offers M.B.A. and bachelor’s programs in Business Administration with concentrations in Marketing, Accounting, and more
  • Ranked among the Best Online MBA Programs and Graduate Business Programs for 2017 by U.S. News and World Report
  • Coursework covers topics like project management, management fundamentals, and business strategies
  • Business students complete a capstone class that demonstrates their knowledge of business concepts

Programs:

  • Bachelor of Science in Accounting
  • Bachelor of Science in Business Administration - Finance
  • Purdue University Global
  • Experience world-class education online: Purdue Global offers 180 programs at associate's, bachelor's, master's and doctoral levels.

Programs:

  • BS in Accounting
  • BS in Accounting - Public Accountancy
  • BS in Accounting - Managerial Accountancy
  • And more...

There are a lot of reasons Bryant & Stratton College is the place to get an education. From the personal attention you receive from instructors that stay after class to make sure you are on the right track.

Programs:

  • BBA Accounting
  • BS/BBA Financial Services
  • AAS Accounting
  • And more...
Locations:  Virginia Beach

You’re serious about success. With your busy schedule and the desire to move your career forward, you can earn an accredited associate, bachelors or master’s degree at a pace that works for you anywhere, anytime, 24/7.

At AIU, the Serious U, you can get started to get ahead.

Programs:

  • Bachelor of Accounting
  • Bachelor's (BBA) - Accounting
  • Bachelor's (BBA) - Finance

Centura College, with campus locations in Virginia, South Carolina and Florida, is dedicated to helping students gain the skills and attitudes necessary to succeed. Drawing from over 30 years of career school experience.

Programs:

  • Associate of Applied Science Degree in Business-Concentration in Accounting Administration
Locations:  Newport News
  • Education Connection is a 100% Free College Matching Service used by 50,000 People Daily.
  • Get Matched to the Right Business Administration and Management, Accounting, Healthcare Administration, Marketing and Entrepreneurship Degree Program for YOU.
  • Affordable and Flexible Business Degree Programs from Top Colleges Across the Nation. Both Online And Campus!
  • Just Fill Out a Few Questions and You Can Find Your Perfect Business Degree Program Within Minutes.
  • Start Using our Fast, Free, and Easy Matching Service Right HERE and Right NOW!

Programs:



Matching School Ads
  • Purdue University Global
  • Experience world-class education online: Purdue Global offers 180 programs at associate's, bachelor's, master's and doctoral levels.

Programs:

  • Bachelors of Science in Nursing - RN to BSN
  • Accelerated BSN to MSN
  • Fortis offers nursing programs including ADN, PN, BSN degrees, and more
  • 40+ schools in 15 states including Florida, Arizona, Ohio, and Virginia
  • All colleges are accredited by ABHES, ACCSC, ACICS, or other accrediting bodies
  • Fortis Online serves benefits to US military service members
  • Grants & scholarship aid may be available for qualifying students

Programs:

  • Registered Nurse to Bachelor of Science in Nursing
  • Associate Degree in Nursing
  • Practical Nursing
  • And more...
Locations:  Grand Prairie

There are a lot of reasons Bryant & Stratton College is the place to get an education. From the personal attention you receive from instructors that stay after class to make sure you are on the right track.

Programs:

  • BS Nursing Generalist
  • AAS/ADN Nursing
  • AAS Medical Assisting
Locations:  Virginia Beach
  • Why Earn Your Degree from GCU?
  • Options: Choose from a variety of undergraduate and graduate degree programs in Business, Nursing, Psychology, Education & more!
  • Convenience: Complete courses online, on campus, or a combination of both!
  • Earlier Graduation: Our 4-credit courses allow you to complete your degree program in less time.
  • Transfer Friendly: We will request your transcripts, evaluate your graduate coursework, and determine your anticipated graduation date within 24 hours.
  • Quality: Grand Canyon University was founded in 1949 and is regionally accredited. Learn more today!

Programs:

  • B.S. in Nursing (Registered Nurse - R.N. to B.S.N)

Making the decision to earn your degree and pursue your career goals could be the best decision you ever make. Enroll at ECPI University and you’ll join a collaborative and fostering learning environment, surrounded by faculty and staff who are there to support you through the entire process.


What sets ECPI University apart? Just ask the employers who hire our graduates. Since 1966, more than 3,800 employers have looked to ECPI for talented professionals who are capable of entering the workplace and doing the job right on the very first day. That’s because our curriculum is designed to meet the needs of today’s highly-specialized job market.

 

What Are You Waiting For?

Programs:

  • Nursing (RN) - Associate's
  • Practical Nursing - Diploma
Locations:  Newport News
  • Flexible, online and on-campus program available.
  • Capstone projects and clinical practicums that can help prepare students for more career opportunities.
  • Students learn from instructors with experience in the health care field.
  • Programs include Bachelor of Science in Health Care Administration, Bachelor of Science in Health and Wellness, Master of Health Care Administration, and more.

Programs:

  • Bachelors of Science in Nursing - RN to BSN
  • Medical Assisting

Centura College, with campus locations in Virginia, South Carolina and Florida, is dedicated to helping students gain the skills and attitudes necessary to succeed. Drawing from over 30 years of career school experience.

Programs:

  • Associate of Occupational Science Degree in Medical Assisting-Concentration in Clinical Support
  • Medical Assisting Diploma
Locations:  Newport News

The Metropolitan Institute of Health and Technology (MIHT) is dedicated to educating men and women to serve with confidence in the health and technology industry. MIHT provides career training for students to move forward in their chosen field of study, changing their lives for the better. MIHT strives to provide quality education with affordable tuition. Our staff works to determine the best financial options for students on an individualized level.

Programs:

  • Clinical Medical Assisting
Locations:  Lorton
Want to take your career to the next level? Salem University Online is the perfect place to start. Study online, from anywhere, and gain the skills you need to succeed.

Programs:

  • RN to BSN
  • Looking for an Online Healthcare Degree Program That May Improve Your Career Options?
  • EarnMyDegree.com Can Help You Match Your Educational Goals With Your Desired Career.
  • Whether You Are Looking to Earn a Degree Online, or Study at a Nearby Campus, This Is The Place to Connect With a College That May Be Ideal for You.
  • Browse Through Our List Of Online Colleges and Traditional Schools to Determine Potential Places to Earn a Degree NOW!

Programs: