cost behaviour

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The changes that occur to total costs as a result of changes in activity levels within an organization. The total of the fixed costs tends to remain unaltered by changes in activity levels in the short term, whereas the total of the variable costs tends to increase or decrease in proportion to activity. There are also some costs that demonstrate semi-variable cost behaviour, i.e. they have both fixed and variable elements. The study of cost behaviour is important for breakeven analysis and also when considering decision-making techniques.

Subjects: Accounting.

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