Why is knowledge of cost behavior important for managerial d

Why is knowledge of cost behavior important for managerial decision making? Give an example to illistrate your answer.

Solution

As cost is one of the most important factor in relevance to arrive at profit.

There are various types of cost fixed variable etc

Cost that remain the same no matter what alternatives manager chooses are not relevant while decision making.

Example if the company has to pay full rent despite having fewer employees that cost will not be a relevant cost.

If a company can move to a smaller location and pays less rent that the rent will become relevant cost