{"id":99,"date":"2021-11-29T16:02:00","date_gmt":"2021-11-29T16:02:00","guid":{"rendered":"https:\/\/www.thetrainingplace.org\/blog\/2021\/11\/29\/classification-of-costs-by-behaviour\/"},"modified":"2024-11-22T10:02:54","modified_gmt":"2024-11-22T10:02:54","slug":"classification-of-costs-by-behaviour","status":"publish","type":"post","link":"https:\/\/www.thetrainingplace.org\/blog\/2021\/11\/classification-of-costs-by-behaviour\/","title":{"rendered":"Classification of costs by behaviour"},"content":{"rendered":"<p><b style=\"mso-bidi-font-weight: normal;\"><u><span style=\"color: #4472c4; font-size: 16.0pt;\">CLASSIFICATION OF COSTS BY BEHAVIOUR<span style=\"mso-spacerun: yes;\">\u00a0 <\/span><\/span><\/u><\/b><\/p>\n<p><span style=\"font-family: 'Arial',sans-serif;\">Classifying costs by behaviour requires you to classify the costs into<\/span><\/p>\n<ul>\n<li><span style=\"font-family: 'Arial',sans-serif;\">Variable costs<\/span><\/li>\n<li>Fixed costs<\/li>\n<li>Semi-variable costs<\/li>\n<li>Stepped costs<\/li>\n<\/ul>\n<p><b style=\"mso-bidi-font-weight: normal;\"><u><span style=\"font-family: 'Arial',sans-serif;\">Variable costs-<\/span><\/u><\/b><span style=\"font-family: 'Arial',sans-serif;\"> these are costs that vary with the level of production or activity. It is usually assumed to vary in direct proportion to production. For example, if you make twice the number of chairs then the assumption is that the amount of wood used would be doubled.<\/span><\/p>\n<p><b style=\"mso-bidi-font-weight: normal;\"><u><span style=\"font-family: 'Arial',sans-serif;\">Fixed costs-<\/span><\/u><\/b><span style=\"font-family: 'Arial',sans-serif;\"> these are costs that are not affected by changes in the level of production or activity, hence costs that don\u2019t vary. For example, rent costs for a factory. It is assumed that if production increases, the factory rent cost would not be increasing based on the production volume.<\/span><\/p>\n<p><b style=\"mso-bidi-font-weight: normal;\"><u><span style=\"font-family: 'Arial',sans-serif;\">Semi-variable costs-<\/span><\/u><\/b><span style=\"font-family: 'Arial',sans-serif;\"> these are costs that have a fixed element and a variable element. This means that if production were to double, the cost of production will not double because of the fixed cost element in the production cost, which will remain the same. For example, the cost of electricity for the factory has a fixed element relating to lighting and a variable element relating to power used in the production line.<\/span><\/p>\n<p><b style=\"mso-bidi-font-weight: normal;\"><u><span style=\"font-family: 'Arial',sans-serif;\">Stepped costs-<\/span><\/u><\/b><span style=\"font-family: 'Arial',sans-serif;\"> these are costs that remain fixed up to a particular level of activity, but which rise to a higher (fixed) level, if activity goes beyond that range. For example, a firm may pay \u00a340,000 per year to rent a factory in which they can produce up to 1 million units of product per year. However, if demand increases to more than 1 million units, a second factory may be required, in which case the cost if factory rent may step up to, say, \u00a380,000 per year and then be constant until we want to make more than 2 million units.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>CLASSIFICATION OF COSTS BY BEHAVIOUR\u00a0 Classifying costs by behaviour requires you to classify the costs into Variable costs Fixed costs Semi-variable costs Stepped costs Variable costs- these are costs that vary with the level of production or activity. It is usually assumed to vary in direct proportion to production. For example, if you make twice &#8230; <a class=\"read-more\" href=\"https:\/\/www.thetrainingplace.org\/blog\/2021\/11\/classification-of-costs-by-behaviour\/\">Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-99","post","type-post","status-publish","format-standard","hentry","category-uncategorised"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Classification of costs by behaviour - The Training Place Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.thetrainingplace.org\/blog\/2021\/11\/classification-of-costs-by-behaviour\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Classification of costs by behaviour - The Training Place Blog\" \/>\n<meta property=\"og:description\" content=\"CLASSIFICATION OF COSTS BY BEHAVIOUR\u00a0 Classifying costs by behaviour requires you to classify the costs into Variable costs Fixed costs Semi-variable costs Stepped costs Variable costs- these are costs that vary with the level of production or activity. It is usually assumed to vary in direct proportion to production. For example, if you make twice ... 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