Question

Taylor Corporation is analyzing the cost behavior of three cost items, A, B, and C, to budget for the upcoming year. What is the purpose of this analysis?

1) To determine the fixed costs associated with each cost item
2) To determine the variable costs associated with each cost item
3) To determine the total costs associated with each cost item
4) To determine the average costs associated with each cost item

Answer 1

The purpose of analyzing the cost behavior of cost items A, B, and C is to determine the variable costs associated with each cost item.

Step-by-step explanation:

The purpose of analyzing the cost behavior of cost items A, B, and C is to determine the variable costs associated with each cost item. By understanding the variable costs, Taylor Corporation can better budget and plan for the upcoming year. Variable costs are expenses that change in relation to the level of production or sales, such as direct labor or raw materials.