Cost Behavior Patterns

LEARNING OBJECTIVE

  1. Identify typical cost behavior patterns.


Question: To predict what will happen to profit in the future at Bikes Unlimited, we must understand how costs behave with changes in the number of units sold (sales volume). Some costs will not change at all with a change in sales volume (e.g., monthly rent for the production facility). Some costs will change with a change in sales volume (e.g., materials for the mountain bikes).What are the three cost behavior patterns that help organizations identify which costs will change and which will remain the same with changes in sales volume?

Answer: The three basic cost behavior patterns are known as variable, fixed, and mixed. Each of these cost patterns is described next.