CIMA Fundamentals Of Management Accounting (BA2) Practice Exam

Cost behavior is defined as:

The total cost remains fixed regardless of output. The way in which a cost changes as volume of output or activity level changes. The portion of cost that does not vary with activity. The average cost per unit across different output levels.

Correct Answer:

The way in which a cost changes as volume of output or activity level changes.

Explanation:

Cost behavior is about how a cost responds when activity level changes. Some costs stay fixed in total as output changes, some vary in direct proportion to activity, and some are a mix of fixed and variable elements. This understanding lets you forecast total costs at different output levels and perform analyses like CVP. The best choice captures the essence by describing how a cost changes as volume changes. The other statements refer to fixed costs in total, the fixed portion of a mixed cost, or the average cost per unit, none of which define cost behavior by itself.

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