02

ACTIVITY COST
BEHAVIOR

- Izzatul Barokah
- Dinda Purtikawati
PAKT IUP 2019
- Lyra Renita
- Eva Nur Halimah
C O S T B E H AV I O R ?

Cost behavior is the way a cost changes in with changes in activity usage. Cost describe

whether the input is fixed or variable in relation to change output activity.

ACTIVITY COST BEHAVIOR
MODEL
 Cost classification based on behavior

Fixed Cost: A fixed cost is a cost which, in total, remains constant within the relevant range when the
level of activity output changes
• committed fixed cost
• discretionary fixed cost

Variable Cost: Variable costs are costs that, in total, vary in proportion to changes in
output.
• True Variable
• Step Variable

Semi Variable Cost: Mixed costs are costs that have both fixed and variable components.
 The role of resource use models in
understanding cost behavior

Capacity is the actual or potential ability to do something. So in the discussion of the

capacity of an activity, what is described is the number of activities that can be
carried out by the company. The number of activities required depends on the
required level of performance. Usually, it can be assumed that the required capacity
is related to the rate at which the activity is performed efficiently. The efficient level
of activity performance is called practical capacity.
 The role of resource use models in
understanding cost behavior
Flexible Resources
resources obtained from outside and not
a long-term commitment is required for each
certain amount resource. Because the cost of
available resources when needed is the same at a
cost
Committed Resources
resources obtained by using explicit or
implicit contracts to obtain quantity
certain resources, regardless of whether
the quantity of resource fully available or
not.
• committed fixed expenses
• discretionary fixed expenses
 Assumption of
Linearity
The definition of variable costs assumes a linear relationship between activity costs and
the associated activity drivers. If the assumption of a linear relationship is used, then the
main issue is how well this assumption approximates the underlying cost function.
Total cost = Fixed cost + (variable cost per unit x output)
 Step Cost
Behavior
1. Step variable cost, In step variable costing, the step width is small and the resource cost changes
as a result of small changes in resource use. Usually
Step variable costs are considered to be strictly variable costs.

2. Step fixed costs are costs that follow the behavior of costs with steps
wide. Many committed resources follow this cost function. Cost
Fixed step is categorized as a fixed cost. Most fixed costs step
is fixed over the company's manual operating range
Step Cost
Behavior
 Mixed Cost Behavior

Mixed cost behavior can occur if the activities carried out by the
company require the existence of bound resources and flexible
resources at the same time. This indicates the existence of mixed cost
behavior.
 Mixed Cost Behavior
Example:
the company rents a copier for document copying activities. The rental fee of IDR
2,000,000 is paid annually. To operate it, the company has to pay an average
operating cost of Rp. 60 per share to cover the costs of toner, paper and
maintenance. The copier is rented for 3 years and has a production capacity of
200,000 pieces/year. Rp 2,000,000 represents the resource that must be provided in
advance and CU60 represents the cost of acquiring the resource when it is used.
This cost behavior can be shown by the equation:
Y = IDR 2,000,000 + 60X
 Method for Separating Mixed
Costs Into Fixed and Variable
Components
Least
High-Low
squares
Method Scatterplot
method
a m e th o d o f d e te r m in in g th e
a m e th o d f o r d e te r m in in g th e A m e t h o d th a t c a lc u l at e s t he
e q u a ti o n o f a li n e b y
e q ua tio n o f a s tr ai g h t l in e by m a gn i tu d e o f t he d e v ia tio n b y
d e s c r i b in g t h e d a ta in a g r a p h
f ir st se le c ti ng tw o p o in ts f ir st squ a r in g e a c h d ev i a tio n
( h ig h a n d lo w p o in ts ) t o b e an d th e n su m m in g t h e sq u a r ed
u se d to c a lc u la te th e d ev i at io n as a m e a su r e o f
in te r s e c tio n a nd s lo p e o ve r a ll c lo se n e ss
p a r a m e te r s.
High-
Low
Method
Scatterplot
Least
squares
method

Formula:
Y = a + b X
Y = total cost
a = fixed cost
b = variable cost
X = activity level
(Output)
Cost Formula Reliability
The best-squares method identifies the best line, but doesn't state how good it is. This
percentage is indicated by the coefficient determinant (R). Because the coefficient is
the percentage of reliability that explained, the value always ranges between 0 and 1.
The closer R is to 1, the better the line.
following formula:
R² = V[YXY - YXYY/nl
[EY² - (YY)²/n]
M U LT I P L E
REGRESSION

One driving factor may not be sufficient to explain variability

activity cost behavior. Adding another additional variable to
the equation
may improve its ability to predict activity costs,
in addition to providing an overview of how activity costs can
be managed.

The linear equation is expanded to:

Y = F + V1 X1 + V2 X2
 MANAGERIAL
C O N S I D E R AT I O N S
The advantage of using managerial judgment to separate fixed and variable costs lies in its
simplicity.
When managers have deep knowledge about the company and its cost patterns, this method can
give good results.