Cost Behavior Analysis

Cost Behavior Analysis examines how a company's costs change in response to fluctuations in production or business activity levels. It identifies three main types of costs: fixed costs, which remain constant regardless of activity; variable costs, which increase or decrease with production levels; and mixed costs, which have both fixed and variable components. Understanding these patterns helps businesses plan budgets, set prices, and make strategic decisions, ensuring they can operate efficiently and respond to market changes effectively. Ultimately, it aids in maximizing profitability while controlling costs.