1.Chapter 3 is entitled “cost behavior” and deals with how an accountant who works for an organization can examine and analyze different aspects of costs. Assume you are a CFO, and your CEO has asked you to give him/her a briefing on why he/she should be interested in how a cost behaves. What do you explain to the CEO? Pleasse give a brief discussion of why you believe cost behavior should be a part of information made to the CEO. 2.In general, three methods of estimating costs are discussed in Chapter 3. Please describe the three methods and give advantages and disadvantages to all. Which of the three methods would you use, given that your boss wants a very quick description of a cost’s behavior for planning/decision making?
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Cost behaviour can well be understood when an organization engages in heightened level of activity and operations. It entails the changes in cost that occurs every time the organizations increases production costs. This may be motivated by the need to meet the demands of an expanded market, increase in cost of factors of production, changes in the internal environment and many other factors. Some costs vary in the same proportion with the level of varying organization activities (Hansen, Mowen, and Guan, 2009). They are referred to as variable costs….
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