Deck 3: Cost Behaviour

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

Fixed costs per unit increase as production levels increase.

Question 7

The graph of a total variable cost will be a horizontal line.

Question 8

Unit variable costs change as total production increases.

Question 9

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

Question 10

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

Question 11

Total fixed costs change in response to changes in the volume of production.

Question 12

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

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

Question 13

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

Question 14

The slope of the total variable cost line is the variable cost per unit of activity.

Question 15

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

Question 16

The fixed cost per unit always remains the same.

Question 17

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

Question 18

Mixed costs are part variable and part fixed.

Question 19

The graph for total fixed costs will be a vertical line.

Question 20

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

Question 21

Which of the following is a fixed cost?

A) Direct materials cost
B) Direct labour cost
C) Sales commissions expense
D) Straight-line depreciation expense

Question 22

Which of the following statements describes variable costs?

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

Question 23

Which of the following statements is TRUE with respect to total fixed costs?

A) They will increase as production decreases within the relevant range.
B) They will remain the same as production levels change 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 24

Cost behaviour can be mathematically expressed using equations.

Question 25

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

Question 26

The following chart shows three different costs: Cost A, Cost B, Cost C.
For each cost, the chart shows the total cost and cost per unit at two different volumes within the same relevant range. Based on this information, identify each cost as fixed, variable or mixed.

Question 27

Renting a car and paying $15 per day plus $.03 per mile driven is an example of what type of cost?

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

Question 28

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

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

Question 29

Which of the following statements is TRUE with respect to variable costs per unit?

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 remain the same as production levels change within the relevant range.
D) They will decrease as production decreases within the relevant range.

Question 30

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

Question 31

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

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

Question 32

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 increase as production decreases.
D) They will remain the same as production levels change.

Question 33

Direct materials is an example of what type of cost?

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

Question 34

The following chart shows three different costs: Cost A, Cost B, Cost C. For each cost, the chart shows the total cost and cost per unit at two different volumes within the same relevant range. Based on this information, identify each cost as fixed, variable or mixed.

Question 35

Selected financial data for Flash Corporation follows for a production level of 100,000 units:

A. Calculate the variable cost per unit.
B. If Flash Corporation makes 80,000 units, calculate the fixed cost per unit.
C. If Flash Corporation makes 150,000 units, calculate the total variable costs.
D. If Flash Corporation makes 200,000 units, calculate the total costs.

Question 36

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

A) Variable costs fluctuate in total with production and sales.
B) Variable costs are fixed in total.
C) Variable costs do not change in total over any range.
D) Variable costs per unit change with changes in volume.

Question 37

The following chart shows three different costs: Cost A, Cost B, Cost C. For each cost, the chart shows the total cost and cost per unit at two different volumes within the same relevant range. Based on this information, identify each cost as fixed, variable or mixed.

Question 38

Jensen Ltd. reports the following information for September:

Required:
If sales double in October, what is the projected operating income?

Question 39

Which of the following statements is TRUE with respect to total variable costs?

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

Question 40

The following chart shows three different costs: Cost A, Cost B, Cost C. For each cost, the chart shows the total cost and cost per unit at two different volumes within the same relevant range. Based on this information, identify each cost as fixed, variable or mixed.

Question 41

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

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

Question 42

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

Question 43

The equation for total fixed costs is

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

Question 44

If production increases by 15%, how will total variable costs likely react?

A) Increase by 7.5%
B) Increase by 15%
C) Decrease by 15%
D) Remain the same

Question 45

Total variable 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 46

Step costs are fixed over small range of activity and then jump up to a new fixed level with moderate changes in volume.

Question 47

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

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

Question 48

The relevant range is the band of volume where total fixed and variable costs remain constant.

Question 49

Management has little or no control over

A) committed fixed costs.
B) discretionary fixed costs.
C) all fixed costs.
D) variable costs.

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

An equation of a line for all costs is

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

Question 52

The relevant range is the band of volume where total fixed and variable costs per unit remain constant.

Question 53

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

Question 54

A bank that replaces mailing monthly bank statements to customers with electronic statements would have an increase in variable costs and a decrease in fixed costs.

Question 55

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

Question 56

An equation of a line for total mixed costs is

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

Question 57

When predicting costs at different volumes, managers should consider which of the following?

A) The relevant range of the cost
B) The type of cost behaviour
C) Neither of the above
D) Both of the above

Question 58

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 59

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

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

Question 60

The equation for a straight line is y = vx + f.

Question 61

If a company's overhead cost equation is y = $9.90x + $120,014. The "x" is

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

Question 62

The following graphs indicate which type of cost behaviour?

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

Question 63

In the equation: y = vx + f, what term represents the total variable cost component?

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

Question 64

Total fixed costs for Excelsior Corporation are $600,000. Total costs, both fixed and variable, are $750,000 if 125,000 units are produced. The fixed cost per unit at 300,000 units would be

A) $6.00/unit.
B) $0.50/unit.
C) $4.80/unit.
D) $2.00/unit.

Question 65

The following graph indicates which type of cost behaviour?

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

Question 66

In the equation y = $9.90x + $120,014, "x" represents

A) total fixed costs.
B) number of units produced.
C) total overhead costs.
D) total variable costs.

Question 67

Total fixed costs for Yellow Boats Inc. are $100,000. Total costs, both fixed and variable, are $500,000 if 125,000 units are produced. The total variable costs at a level of 200,000 units would be

A) $640,000.
B) $160,000
C) $800,000.
D) $312,000.

Question 68

The representation for fixed cost per unit of activity is

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

Question 69

Total costs for Watson & Company at 100,000 units are $350,000, while total fixed costs are $150,000. The total variable costs at a level of 200,000 units would be

A) $700,000.
B) $175,000.
C) $400,000.
D) $300,000.

Question 70

YouCall offers a calling plan that charges $2.00 per month plus $0.05 per minute of call time. Under this plan, what is your monthly cost if you talk for a total of 100 minutes?

A) $7.00
B) $5.00
C) $3.00
D) $2.00

Question 71

The representation for total variable costs is

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

Question 72

In the equation y = $9.90x + $120,014, "y" represents

A) total fixed costs.
B) variable costs/unit.
C) total overhead costs.
D) total variable costs.

Question 73

In the equation y = $9.90x + $120,014

A) $120,014 are the total variable costs.
B) $120,014 are the total fixed costs.
C) $120,014 are the total costs.
D) $120,014 are the total overhead costs.

Question 74

In the equation: y = vx + f, what term represents the fixed cost component?

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

Question 75

Total fixed costs for Herman Enterprises are $200,000. Total costs, both fixed and variable, are $550,000 if 100,000 units are produced. The variable cost per unit is

A) $2.00/unit.
B) $7.50/unit.
C) $3.50/unit.
D) $5.50/unit.

Question 76

Total fixed costs for Threads Company are $80,000. Total costs, both fixed and variable, are $170,000 if 125,000 units are produced. The fixed cost per unit at 100,000 units would be

A) $1.70/unit.
B) $0.90/unit.
C) $2.50/unit.
D) $0.80/unit.

Question 77

If 125,000 units are produced, total costs are $380,000. Total fixed costs for White Sails, Inc. are $180,000. The variable cost per unit is

A) $4.48/unit.
B) $1.60/unit.
C) $3.04/unit.
D) $1.44/unit.

Question 78

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

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

Question 79

In the equation: y = vx + f, what term represents the total cost?

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

Question 80

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

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