6.5: Why It Matters- Cost Behavior Patterns
Why learn about cost behavior patterns?
Knowing how costs behave and why they change is an important component to analyzing pricing, reducing costs and managing expenses. There are a variety of costs that go into the production of a product or the performance of a service. In this module we will define produce and period costs, and review examples of fixed and variable costs.
Mixed costs are also discussed, as well as ways to break these costs into the fixed and variable components. Various methods can be used depending on the accuracy you need. Knowing these terms and how these costs interrelate can help you to be an effective manager and know how to understand the reports prepared by the managerial accounting department.