Management Accounting Theory of Cost Behavior

image_660c1885980e6584da16e992fc2b7408

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/Consumer and Family Financial Services
  • BA/Finance
  • And more...
  • Our top-ranking program blends modern business theory with real-world experience
  • Institutionally accredited by SACSCOC with ACBSP graduate business program accreditation
  • High-quality, Christ-centered education with online and select on-campus & evening courses
  • Qualifying bachelor's students can transfer up to 90 credit hours into their degree program
  • 86% of Regent students receive some form of financial aid

Programs:

  • Bachelor of Science in Accounting
  • Bachelor of Science in Business - Accounting
  • Which career path will you take – Business, Nursing, Education, Psychology? Something else? GCU offers more than 100 majors to get you started!
  • Colangelo College of Business: Features more than 25 programs from the bachelor through the master's level, including several high-demand MBA programs and an accelerated accounting degree.
  • College of Nursing and Health Care Professions: Rich 25-year history providing outstanding health care and nursing degree programs, including an RN to BSN program & master's in nursing degrees.
  • College of Education: Whether you are looking to start or advance your career as a teacher or administrator, GCU offers bachelor’s and master’s in education degrees in key areas.
  • College of Humanities and Social Sciences: Provides a job focused education and features a variety of programs from counseling and psychology to justice studies, history and English literature.
  • Does something else interest you? GCU also offers programs in Doctoral Studies; Theology; Science, Engineering & Technology; and Fine Arts & Production. Speak with an enrollment counselor today!

Programs:

  • B.S. in Accounting
  • B.S. in Finance and Economics

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

At Post University, we believe you shouldn’t have to put your life on hold to further your education. That’s why we offer our degree and certificate programs in a highly interactive online format that emphasizes flexibility, convenience, and support.
 

Programs:

  • B.S. in Accounting
  • B.S. in Business Administration / Accounting
  • B.S. in Finance
  • And more...

CTU Classes Are As Close As The Mobile App.
Take classes with the help of your smartphone, tablet or laptop. CTU’s online bachelor’s programs were ranked among the Best Online Bachelor’s Programs by U.S. News & World Report.

Programs:

  • Bachelor of Science in Accounting
  • Bachelor of Science in Business Administration - Finance

100% Online & No Standardized Testing

We are committed to helping you achieve your goals and complete your degree as quickly as possible.

Programs:

  • BS in Business - Finance
Get the hands-on training and skills it takes to succeed with Ashworth College, a respected, worldwide leader in distance education. Study at the times and places most convenient for you.

Programs:

  • Payroll Clerk
  • Find Online Schools. 100% Online Accredited Courses
  • Get Matched to Programs In A Few Clicks!
  • Earn an Affordable Degree from Home at your own pace
  • Get College info today. Its Free and Easy!

Programs:

  • View Associates, Bachelors or Graduate Degree Programs in Business Near YOU!
  • Enter YOUR Needs and Requirements. Get Matched to the Perfect Campus or Online Degree Programs for You.
  • Free information for Business Administration and Management, Accounting, Marketing and Advertising, Business Information Systems Degree Programs and MORE.
  • Accredited, Flexible Business Administration and Management Degree Programs to Fit Your Time and Budget. Use our Matching Service - It's Easy and FREE!

Programs:

Locations:  Atlanta


Matching School Ads
  • 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

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:

  • Practical Nursing - Diploma
Locations:  Manassas
  • 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)

Designed with the needs of working adult students in mind, South University, Online Programs is built on the similar curriculum offered at South University's campus locations. As a student at South University, Online Programs you will receive the same quality instruction, variety of learning options and level of service found at the campus locations.

Programs:

  • Nursing (RN to BSN)

CTU Classes Are As Close As The Mobile App.
Take classes with the help of your smartphone, tablet or laptop. CTU’s online bachelor’s programs were ranked among the Best Online Bachelor’s Programs by U.S. News & World Report.

Programs:

  • Bachelor of Science in Nursing (RN to BSN completion)

Regent University prepares students with the knowledge to excel and the faith to live with purpose. Our 20,000 alumni, from more than 110 countries, are changing the world as accomplished professionals. Named a top-15 school nationally for online bachelor's programs (U.S. News & World Report, 2015), Regent is among the most affordable undergraduate Christian colleges (CCCU 2015). Fully accredited, challenging programs are available online and on campus. New classes begin every eight weeks.

Programs:

  • Bachelor of Science in Nursing (RN to BSN)

100% Online & No Standardized Testing

We are committed to helping you achieve your goals and complete your degree as quickly as possible.

Programs:

  • BS in Nursing (RN to BSN)
  • Find Online Schools. 100% Online Accredited Courses
  • Get Matched to Programs In A Few Clicks!
  • Earn an Affordable Degree from Home at your own pace
  • Get College info today. Its Free and Easy!

Programs:

  • eLearners.com Helps You Find the Right College within Minutes
  • Get Matched to the Perfect Nursing Degree Programs From Top Colleges Here
  • Learn at Your Own Pace And Get Qualified to Pursue a Career You Will Love.
  • Answer a Few Questions And You Are One Step Closer to Enroll in a Top College!

Programs:

Locations:  Atlanta