Definition
How a cost reacts to changes in activity level. Costs can be fixed (stay constant), variable (change proportionally), or mixed (part fixed, part variable).
C
Cost Behavior
Related Terms
Fixed Cost
A cost that stays constant in total regardless of changes in activity level. Examples: rent, insurance, salaries. Per-unit fixed cost decreases as volume increases.
Variable Cost
A cost that changes in total proportionally with activity level. Per-unit variable cost stays constant. Examples: direct materials, sales commissions.
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