HLS 6060 DF4 Assignment: Fixed, Step and Variable Costs

Costs
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Fixed, Step and Variable Costs
Costs in a budget can vary widely relative to the various business activities. It is common that business activities will also vary widely. It is the changes in the costs as a response to the business activities that bring about what is referred to as cost behavior (Accounting For Management, 2017). As a manager one should be in a position to predict the behavior of any cost in particular as the business activities change. With reference to the cost behavior and the business activities, there are three major costs; fixed, variable and step (Simple Studies, 2017).
The fixed costs as the name suggests do not change regardless of the changes in the business activities. The cost of rent is for example a fixed cost to a business. Where an advertising company rents an office for $10,000 a month, they will have to pay the rent of $10,000 monthly regardless of handling ten or three hundred clients. The variable cost on the other hand is one that changes with the changes in the business activities (Accounting For Management, 2017). The cost of raw materials for example affects the end cost of a product such as a car. On the other hand, t...