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Welcome to accounting! Today, we will discuss cost behavior, which refers to how total costs change as our activity level changes. There are four types of costs: variable costs, which change in total as activity increases; fixed costs, which stay constant regardless of activity; semi-variable costs, which have both fixed and variable components; and step costs, which increase in steps as activity level changes. Variable costs include direct materials, direct labor, variable overhead, and variable selling general and administrative costs. Variable costs are typically shown on a per-unit basis, such as $1.50 per unit.
