Background: In contemporary management accounting practices, it is generally assumed that a cost (or part of it) would either change proportionally with the change in the cost driver (variable) or totally unresponsive to the change in the cost driver (fixed). However, recent research in cost behaviour shows that costs can be "sticky" (Anderson, Banker and Janakiraman, 2003). The identification of sticky cost behaviour can potentially have significant impacts on management accounting practices.
Required:
(a) What is the traditional view on cost behaviour?
(b) What is meant by sticky cost behaviour? What are the factors that lead to the occurrence of sticky cost behaviour?
(c) How would the budgeting practice be affected by sticky cost behaviour?
(d) How would the evaluation of organisational performance be affected by sticky cost behaviour?
The report should be in essay format with a limit of 2,000 words.