Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 40

The cost per seat-mile for a major U.S. airline is 13.7¢. Therefore, to estimate the cost of flying a passenger from Detroit to Los Angeles, we should multiply 1,980 miles by 13.70. Do you agree?

Step 1 of 2

Cost behavior: -

Cost depending upon to response change in the level of activity. It also classified into fixed cost, variable cost, semi variable cost.

Fixed cost: -

Fixed cost is the cost which does not very the change in the volume of activity for ex. short run, salary, deprecation, pent advertisement expense.

Variable cost: -

Variable cost is the cost which increase or decrease with volume in the same proportion. In which the volume of output increase or decrease for Ex. Material consumed, direct labor cost of utility etc.

Semi variable cost: -

Semi variable cost it contain both fixed and variable cost element, it change according to the volume of that activity ex. Repair and maintenance, supervisor Etc.