Deck 6: Cost Behavior

Question 1

Mixed costs are purely fixed.

Answer 1

False

Question 2

Total fixed costs do not change in response to changes in the volume of production.

Answer 2

True

Question 3

When graphing total variable costs, the cost line begins at the origin.

Answer 3

True

Question 4

The line on a graph representing total fixed costs will be a horizontal line.

Question 5

Fixed costs that are the result of previous management decisions that current managers have no control over in the short run are called ________ fixed costs.

A)discretionary
B)committed
C)standard
D)past

Question 6

Total variable costs change in direct proportion to changes in volume.

Question 7

Unit variable costs do not change as total production increases.

Question 8

The graph of total variable cost will be a horizontal line over all activity levels within the relevant range.

Question 9

Total mixed cost graphs intersect the y-axis at the level of fixed costs.

Question 10

Mixed costs per unit decrease as volume increases because of the variable cost component.

Question 11

Total mixed cost graphs slope upward but do not begin at the origin.

Question 12

An expense such as advertising could be considered a discretionary fixed cost.

Question 13

Total mixed costs increase as volume increases because of the variable cost component.

Question 14

The fixed cost per unit of activity varies with changes in volume.

Question 15

Fixed costs per unit decrease as production levels increase.

Question 16

When graphing total fixed costs, the fixed cost per unit is the slope of the fixed cost line.

Question 17

When graphing total fixed costs, the cost line always begins at the origin.

Question 18

The fixed cost per unit does not always remain the same.

Question 19

The variable cost per unit of activity increases as activity increases.

Question 20

In a manufacturing company, fixed costs remain the same at many different production levels within the relevant range.

Question 21

Which of the following costs is an example of a fixed cost?

A)Sales commissions
B)Salary of plant manager
C)Direct materials
D)Delivery costs

Question 22

Cost B is a _______________ cost.

A)fixed
B)variable
C)mixed
D)sunk

Question 23

For most businesses, annual straight line depreciation expense on the company's building is what type of cost?

A)Variable
B)Mixed
C)Fixed
D)Step

Question 24

With respect to total variable costs, which of the following statements is true?

A)They will remain the same as production levels change within the relevant range.
B)They will decrease as production decreases within the relevant range.
C)They will decrease as production increases within the relevant range.
D)They will increase as production decreases within the relevant range.

Question 25

Total fixed costs for Diamond Enterprises are $700,000. Total costs, including both fixed and variable, are $920,000 if 140,000 units are produced. The fixed cost per unit at 200,000 units would be

A)$3.50/unit.
B)$6.57/unit.
C)$4.60/unit.
D)$1.10/unit.

Question 26

Within the relevant range, which of the following statements is true with respect to fixed costs per unit?

A)They will increase as production increases.
B)They will decrease as production decreases.
C)They will remain the same as production levels change.
D)They will increase as production decreases.

Question 27

Total variable costs at 45,000 units would be

A)$135,000.
B)$202,500.
C)$246,500.
D)unknown.

Question 28

Total mixed costs at 45,000 units would be

A)$202,500.
B)$246,500.
C)$19,000.
D)unknown.

Question 29

Total fixed costs for Randolph Manufacturing are $754,000. Total costs, including both fixed and variable, are $5,000,000 if 160,000 units are produced. The variable cost per unit is

A)$31.25/unit.
B)$4.71/unit.
C)$35.96/unit.
D)$26.54/unit.

Question 30

Cost C is a _______________ cost.

A)fixed
B)variable
C)mixed
D)sunk

Question 31

Total fixed costs for Taylor Incorporated are $260,000. Total costs, including both fixed and variable, are $500,000 if 156,000 units are produced. The variable cost per unit is

A)$4.87/unit.
B)$1.54/unit.
C)$3.21/unit.
D)$1.67/unit.

Question 32

Total fixed costs at 45,000 units would be

A)$25,000.
B)$176,000.
C)$135,000.
D)unknown.

Question 33

Which of the following is a fixed cost?

A)Direct materials cost
B)Direct labor cost
C)Straight-line depreciation expense
D)Sales commission expense

Question 34

With respect to variable costs per unit, which of the following statements is true?

A)They will decrease as production increases within the relevant range.
B)They will increase as production decreases within the relevant range.
C)They will decrease as production decreases within the relevant range.
D)They will remain the same as production levels change within the relevant range.

Question 35

Renting a scooter and paying $30 per day plus $.20 per mile driven is an example of what type of cost?

A)Mixed cost
B)Fixed cost
C)Conversion cost
D)Variable cost

Question 36

Variable costs are described by which of the following statements?

A)They vary per unit of output.
B)They are fixed in total.
C)They are fixed per unit and vary in total.
D)They decrease per unit as production volume increases.

Question 37

A(n)________ cost is a cost whose total amount changes in direct proportion to a change in volume.

A)variable
B)fixed
C)mixed
D)irrelevant

Question 38

Which of the following is a characteristic of a variable cost?

A)Variable costs are fixed in total.
B)Variable costs fluctuate in total with production and sales.
C)Variable costs do not change in total over any range.
D)All of the above may be characteristic of a variable cost.

Question 39

Cost A is a _______________ cost.

A)fixed
B)variable
C)mixed
D)sunk

Question 40

With respect to total fixed costs, which of the following statements is true?

A)They will remain the same as production levels change within the relevant range.
B)They will increase as production decreases within the relevant range.
C)They will decrease as production increases within the relevant range.
D)They will decrease as production decreases within the relevant range.

Question 41

Total fixed costs for Randolph Manufacturing are $804,000. Total costs, including both fixed and variable, are $1,040,000 if 160,000 units are produced. The fixed cost per unit at 188,500 units would be closest to

A)$1.25/unit.
B)$5.52/unit.
C)$4.27/unit.
D)$5.03/unit.

Question 42

Managers often approximate curvilinear costs and step costs as fixed costs.

Question 43

At any given volume, average fixed costs must equal average variable costs.

Question 44

Total fixed costs can be expressed as y = vx, where y = total variable cost, v = variable cost per unit of activity, and x = volume of activity.

Question 45

Total mixed costs can be expressed as a combination of the fixed and sunk cost equations.

Question 46

In the equation y = vx + f, the x represents the fixed costs.

Question 47

If production increases by 25%, how will total fixed costs likely react?

A)Increase by 12.5%
B)Increase by 25%
C)Decrease by 25%
D)Remain the same

Question 48

If 130,000 units are produced, total costs are $333,000. Total fixed costs for Blue Peace Inc. are $145,000. The variable cost per unit is

A)$3.68/unit.
B)$1.12/unit.
C)$2.56/unit.
D)$1.45/unit.

Question 49

In the equation y = vx + f, the f represents the volume of activity.

Question 50

Total mixed costs can be expressed as y = vx, where y = total variable cost, v = variable cost per unit of activity, and x = volume of activity.

Question 51

Total fixed costs for Toys and Trinkets Incorporated are $85,000. Total costs, including both fixed and variable, are $205,000 if 271,000 units are produced. The total variable costs at a level of 280,000 units would be

A)$123,985
B)$211,808
C)$87,823
D)$299,631

Question 52

Relevant range is the range of activity (volume)over which total fixed costs and variable costs per unit can be assumed to remain the same.

Question 53

Total costs for Locke & Company at 140,000 units are $339,000, while total fixed costs are $165,000. The total variable costs at a level of 300,000 units would be

A)$372,857
B)$726,429
C)$158,200
D)$353,571

Question 54

The equation for a straight line is y = fx + v, where y is the total cost, f is the fixed cost per unit, x is the volume of activity, and v is the variable cost per unit.

Question 55

Selected financial data for Spark Enterprises follows for a production level of 120,000 units:
a. Calculate the variable cost per unit.
b. If Flash Corporation makes 75,000 units, calculate the fixed cost per unit.
c. If Flash Corporation makes 160,000 units, calculate the total variable costs.
d. If Flash Corporation makes 180,000 units, calculate the total costs.

Question 56

Total fixed costs for Purple Figs Company are $92,000. Total costs, both fixed and variable are $210,000 if 90,000 units are produced. The fixed cost per unit at 90,000 units would be

A)$1.31/unit.
B)$1.02/unit.
C)$2.33/unit.
D)$3.36/unit.

Question 57

Total fixed costs for Green Planes Inc. are $150,000. Total costs, including both fixed and variable, are $600,000 if 140,000 units are produced. The total variable costs at a level of 230,000 units would be (Round any intermediary calculations to the nearest cent.)

A)$273,913
B)$246,429
C)$985,714
D)$738,300

Question 58

Cost behavior can be mathematically expressed using equations.

Question 59

If production increases by 30%, how will total variable costs likely react?

A)Increase by 15%
B)Decrease by 30%
C)Increase by 30%
D)Remain the same

Question 60

Total variable costs can be expressed as y = vx, where y = total mixed cost, v = mixed cost per unit of activity, and x = volume of activity.

Question 61

What term represents the total variable cost component in the equation: y = vx + f?

A)f
B)v
C)vx
D)y

Question 62

All of the following are discretionary fixed costs except?

A)Property taxes
B)Advertising
C)Research and development
D)Employee development

Question 63

The representation for fixed cost per unit of activity is

A)vx divided by v.
B)vx divided by y.
C)y divided by x.
D)f divided by x.

Question 64

What term represents the fixed cost component in the equation: y = vx + f?

A)y
B)v
C)f
D)vx

Question 65

Which type of cost behavior is indicated by the following graphs?

A)Step
B)Fixed
C)Curvilinear
D)Variable

Question 66

Which of the following would NOT be considered a committed fixed cost?

A)Depreciation
B)Property taxes
C)CEO wages
D)Advertising

Question 67

Which of the following represents the total mixed cost equation?

A)y = vx + f
B)y = vx - f
C)= vx - y
D)= vx + y

Question 68

What term represents the total cost in the equation: y = vx + f?

A)f
B)v
C)vx
D)y

Question 69

Which of the following would be considered a committed fixed cost?

A)Depreciation
B)Research and Development
C)Office holiday party
D)Advertising

Question 70

Which type of cost behavior is indicated by the following graph?

A)Fixed
B)Step
C)Mixed
D)Variable

Question 71

Which of the following cost behaviors cannot be accurately represented by a single straight line?

A)Variable costs
B)Mixed costs
C)Fixed costs
D)Step costs

Question 72

Which of the following represents the equation for total variable costs?

A)y = vx + f
B)y = vx
C)y = vx - f
D)y = v

Question 73

Which of the following would be considered a discretionary fixed cost?

A)Property taxes and insurance
B)Advertising
C)Employees wages
D)Depreciation

Question 74

What variable represents the volume of activity in the equation: y = vx + f? (Assume v represents the variable cost per unit of activity.)

A)v
B)x
C)y
D)vx

Question 75

Management has little or no control over

A)discretionary fixed costs.
B)committed fixed costs.
C)all fixed costs.
D)all of the above.

Question 76

Managers should consider which of the following when predicting costs at different volumes?

A)The relevant range of the cost
B)The type of cost behavior
C)Both of the above should be considered.
D)Neither of the above should be considered.

Question 77

If a company's overhead cost equation is y = $8.80x + $120,020. The "x" is

A)the cost driver in units.
B)total fixed costs.
C)total overhead costs.
D)the variable costs.

Question 78

What term represents the variable cost per unit of activity in the equation: y = vx + f? (Assume x represents the volume of activity.)

A)v
B)f
C)y
D)vx

Question 79

Which of the following represents the equation for total fixed costs?

A)y = f
B)y = vx + f
C)y = vx - f.
D)none of the above

Question 80

Which of the following represents the total cost equation?

A)y = vx - f
B)y = fx + v
C)y = f
D)none of the above