Page 32 - BA2 Integrated Workbook - Student 2017
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Chapter 2
Cost behaviour
In management accounting, when we talk about cost behaviour we are referring to
the way in which costs are affected by fluctuations in the level of activity.
Activity can be, for example:
the number of units produced or sold
miles travelled
hours worked
the number of parcels delivered.
3.1 Fixed cost
The CIMA Terminology defines a fixed cost as a ‘cost incurred for an
accounting period, that, within certain output or turnover limits, tends to
be unaffected by fluctuations in the levels of activity (output or
turnover)’.
Fixed costs can also be known as period costs.
Examples of fixed costs:
Rent
Management salaries
Insurance
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