Cvp analysis requires a recognition of the different

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Unformatted text preview: _____________________________________ David W. Young • Management Accounting for Managers • Chapter 1 Page 24 Copyrighted Material. Do not reproduce without written permission. Chapter 2. Cost Behavior One of the most significant precepts of cost accounting is the notion that different costs are used for different purposes. The full cost accounting principles discussed in Chapter 1, while helpful for activities such as pricing, profitability analysis, and cost comparisons, have some important limitations. Specifically, they do not address how costs vary with changes in volume (or other factors, such as time). Yet information on cost behavior is important for several types of decisions that managers make on a fairly regular basis. As this chapter and the next discuss, using full cost information as a basis for deciding which costs will change, or how costs will change under different decision-making scenarios, can lead managers to make decisions that are financially detrimental to the organizat...
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