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Understanding the theory and practice of costs behaviour is important for managers, economist and investors since they relay on cost information in decision making process. Traditional literature on costs behaviour assumes symmetric relation between cost and volume regardless of whether the volume increases or decreases. Alternative view, tested in this research and known as sticky costs theory, assume that costs increase more when activity rises than they decrease when activity falls by an equivalent amount. Such behaviour of costs occurs because managers deliberately adjust the resources in response to the changes in the volume. In order to test sticky costs theory, we conducted analysis on a sample of Croatian companies that operated in the food and beverage industry during the period from 2003 to 2010. The results of the analysis allowed us to accept the sticky costs hypothesis since the results revealed that material costs and costs of employees (M&E costs) increase 0.85% for every 1% increase in sales and decrease 0.68% per 1% decrease in sales. |
