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Cost behavior refers to the manner in which: |
a cost changes as the related activity changes |
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The three most common cost behavior classifications are: |
fixed costs, variable costs, and mixed costs |
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Costs that remain constant in total dollar amount as the level of activity changes are called: |
fixed costs |
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Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes? |
Salary of a factory supervisor |
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Which of the following describes the behavior of the fixed cost per unit? |
Decreases with increasing production |
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Which of the following activity bases would be the most appropriate for food costs of a hospital? |
Number of patients who stay in the hospital |
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Which of the following activity bases would be the most appropriate for gasoline costs of a delivery service, such as United Postal Service? |
Number of miles driven |
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Most operating decisions of management focus on a narrow range of activity called the: |
relevant range of production |
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Costs that vary in total in direct proportion to changes in an activity level are called: |
variable costs |
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Which of the following is an example of a cost that varies in total as the number of units produced changes? |
Direct materials cost |
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Which of the following is NOT an example of a cost that varies in total as the number of units produced changes? |
Straight-line depreciation on factory equipment |
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Which of the following is NOT an example of a cost that varies in total as the number of units produced changes? |
Insurance premiums on factory building |
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Which of the following describes the behavior of the variable cost per unit? |
Remains constant with changes in the activity level |
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The graph of a variable cost when plotted against its related activity base appears as a: |
straight line |
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A cost that has characteristics of both a variable cost and a fixed cost is called a: |
mixed cost |
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Which of the following costs is a mixed cost? |
Rental costs of $10,000 per month plus $.30 per machine hour of use |
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For purposes of analysis, mixed costs are generally: |
separated into their variable and fixed cost components |
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Marcye Co. manufactures office furniture. During the most productive month of the year, 3,500 desks were manufactured at a total cost of $84,400. In its slowest month, the company made 1,100 desks at a cost of $46,000. Using the high-low method of cost estimation, total fixed costs are: |
b. $28,400 |
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Which of the following statements is true regarding fixed and variable costs? |
c. Fixed costs are constant in total, and variable costs are constant per unit. |
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As production increases, what would you expect to happen to fixed cost per unit? |
Decrease |
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Knowing how costs behave is useful to management for all the following reasons except for |
predicting customer demand. |
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As production increases, what should happen to the variable costs per unit? |
Stay the same. |
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The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed: |
cost-volume-profit analysis |
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In cost-volume-profit analysis, all costs are classified into the following two categories |
variable costs and fixed costs |
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Contribution margin is: |
the excess of sales revenue over variable cost |
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The contribution margin ratio is: |
the same as the profit-volume ratio |
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If sales are $820,000, variable costs are 45% of sales, and operating income is $260,000, what is the contribution margin ratio? |
55% |
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What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit? |
Contribution margin ratio |
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If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would: |
increase |
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f variable costs per unit decreased because of a decrease in utility rates, the break-even point would: |
decrease |
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If fixed costs increased and variable costs per unit decreased, the break-even point would: |
cannot be determined |
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Which of the following conditions would cause the break-even point to decrease? |
Unit variable cost decreases |
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The contribution margin ratio is: |
… |
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Which of the following describes the behavior of the variable cost per unit? |
Remains constant with changes in the activity level |
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The graph of a variable cost when plotted against its related activity base appears as a: |
straight line |
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A cost that has characteristics of both a variable cost and a fixed cost is called a: |
… |
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Which of the following describes the behavior of the variable cost per unit? |
… |
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