W3 - 3B.1 - Introduction to Cost Behaviour and Cost Volume relationships .pdf

CVP Analysis
Prof. Darina Saxunová, PhD.
Faculty of Management in Comenius University,
Bratislava Slovakia
1 ©Darina Saxunová

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Cost Behavior
It is how costs are related to, and affected
by, the activities of an organization.
What is cost behavior?
©Darina Saxunova

A Five-Step Decision Making Process in
Planning & Control Revisited
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➢ Identify the problem and uncertainties
➢ Obtain information
➢ Make predictions about the future
➢ Make decisions by choosing between alternatives, using Cost-
Volume-Profit (CVP) analysis
➢ Implement the decision, evaluate performance, and learn
©Darina Saxunova

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Production Example
Example costs:
Labor wages
Supervisory salaries
Maintenance wages
Depreciation
Energy
Example cost drivers:
Labor hours
No. of people supervised
No. of mechanic hours
No. of machine hours
Kilowatt hours
Cost Drivers
©Darina Saxunova

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Cost Drivers
How well the accountant does at identifying
the most appropriate cost drivers determines
how well managers understand cost behavior
and how well costs are controlled .
©Darina Saxunova

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Cost-Volume-Profit
Analysis (CVP)