For an activity base to be useful in cost behavior analysis: a) there should be a correlation between changes in the level of activity and changes in costs. b) the activity level should be constant over a period of time. c) the activity should always be stated in dollars. d) the activity should always be stated in terms of units.

Question

Noe Quinn

Business

14 December, 13:06

For an activity base to be useful in cost behavior analysis: a) there should be a correlation between changes in the level of activity and changes in costs. b) the activity level should be constant over a period of time. c) the activity should always be stated in dollars. d) the activity should always be stated in terms of units.

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Answers (2)

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Gauge Norris · Answer 1

Option A

Explanation:

cost behavior analysis focuses on the effect business activities have on the cost of operations and seeks to understand their relationship. However for an activity base to be useful to the cost behavior analysis, there must be a correlation between changes in the level of activity and changes in costs.

The other options does not explain the concept of cost behavior analysis.

Duarte · Answer 2

Option A is the correct one

Explanation:

Among the various options given in question statement, option A is correct

Cost behavior analysis is done make management comprehend the impact of various costs change versus changes in activities in various levels of the company. This may involve direct materials, direct labor, and overhead costs. Hence if there is no correlation between changes in the level of activity and changes in costs, then such analysis wont be an effective cost behavioral analysis