cost behavior

Cost behavior refers to how a business’s expenses change in response to variations in its activity level or production volume. For example, some costs, like raw materials or wages, increase as more products are made (variable costs). Others, like rent or salaries of permanent staff, remain relatively constant regardless of output (fixed costs). Understanding cost behavior helps businesses plan and make informed decisions by predicting how costs will change with different levels of activity, enabling better budgeting and financial management.