COST BEHAVIOUR

Cost behaviour refers to the relationship between total costs and activity level. Based on behaviour, costs are categorized as either fixed, variable or mixed. Fixed costs are constant regardless of activity level, variable costs change proportionately with output and mixed costs are a combination of both.

The following table shows a comparison of different costs classifications based on behavior:

Category	Fixed Costs	Variable Costs	Mixed Costs
Total cost	Constant	Changes proportionately with output	Change with output but not proportionately
Cost per unit	Decreases with increase in output	Constant	Decreases with increase in output but less than the decrease in fixed cost per unit
Examples	Plant depreciation, property taxes	Fuel expense, wages, raw materials	Telecommunication costs, senior management salaries, transportation cost