Deck 6: Cost Behavior

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

Fixed costs per unit decrease as production levels increase.

Question 5

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

Question 6

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

Question 7

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 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

Unit variable costs do not change as total production increases.

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

Mixed costs are purely fixed.

Question 19

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

Question 20

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

Question 21

Total fixed costs for Diamond Enterprises are $800,000.Total costs,including both fixed and variable,are $890,000 if 120,000 units are produced.The fixed cost per unit at 200,000 units would be

A)$4.00/unit.
B)$7.42/unit.
C)$4.45/unit.
D)$0.45/unit.

Question 22

Total fixed costs for Taylor Incorporated are $240,000.Total costs,including both fixed and variable,are $500,000 if 125,000 units are produced.The variable cost per unit is

A)$5.92/unit.
B)$2.08/unit.
C)$4.00/unit.
D)$1.92/unit.

Question 23

Total fixed costs for Green Planes Inc.are $120,000.Total costs,including both fixed and variable,are $600,000 if 150,000 units are produced.The total variable costs at a level of 220,000 units would be

A)$409,091.
B)$176,000.
C)$880,000.
D)$704,000.

Question 24

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 25

Total fixed costs for Toys and Trinkets Incorporated are $88,000.Total costs,including both fixed and variable,are $155,000 if 268,000 units are produced.The total variable costs at a level of 275,000 units would be

A)$68,750.
B)$159,049.
C)$90,299.
D)$151,055.

Question 26

Total fixed costs for Purple Figs Company are $52,000.Total costs,both fixed and variable are $160,000 if 80,000 units are produced.The fixed cost per unit at 80,000 units would be

A)$1.35/unit.
B)$0.65/unit.
C)$2.00/unit.
D)$2.65/unit.

Question 27

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 28

If 120,000 units are produced,total costs are $343,000.Total fixed costs for Blue Peace Inc.are $175,000.The variable cost per unit is

A)$4.32/unit.
B)$1.46/unit.
C)$2.86/unit.
D)$1.40/unit.

Question 29

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 30

Total fixed costs for Randolph Manufacturing are $754,000.Total costs,including both fixed and variable,are $1,000,000 if 150,000 units are produced.The fixed cost per unit at 188,500 units would be closest to

A)$1.31/unit.
B)$5.31/unit.
C)$4.00/unit.
D)$5.03/unit.

Question 31

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 32

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 33

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 34

Total fixed costs for Randolph Manufacturing are $754,000.Total costs,including both fixed and variable,are $1,000,000 if 150,000 units are produced.The variable cost per unit is

A)$6.67/unit.
B)$5.03/unit.
C)$11.69/unit.
D)$1.64/unit.

Question 35

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 36

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 37

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 38

Total costs for Locke & Company at 120,000 units are $289,000,while total fixed costs are $145,000.The total variable costs at a level of 250,000 units would be

A)$300,000.
B)$602,083.
C)$138,720.
D)$302,083.

Question 39

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 40

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 41

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

Question 42

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 43

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 44

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 45

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 46

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 47

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 48

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

Question 49

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

Question 50

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

Question 51

The "averaging method" is a method that may be used to separate mixed costs into fixed and variable components.

Question 52

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 53

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 54

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 55

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

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

Question 56

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 57

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 58

Cost behavior can be mathematically expressed using equations.

Question 59

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

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

Question 60

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

Question 61

In the equation y = $11.75x + $550,"x" represents

A)number of units produced.
B)total fixed costs.
C)total costs.
D)none of the above.

Question 62

In the equation y = $7.20x + $790,"y" represents

A)total fixed costs.
B)total costs.
C)variable costs/unit.
D)none of the above.

Question 63

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 64

Total mixed cost is represented by which of the following equations?

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

Question 65

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

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

Question 66

The equation for total fixed costs is

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

Question 67

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 68

In the equation y = $7.20x + $250,250,

A)$250,250 are the total variable costs.
B)$250,250 are the total costs.
C)$250,250 are the total fixed costs.
D)$250,250 are the total overhead costs.

Question 69

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)divided by x.

Question 70

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

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

Question 71

In the equation y = $11.75x + $550,

A)$550 are the total step costs.
B)$550 are the total overhead costs.
C)$550 are the total variable costs.
D)$550 are the total fixed costs.

Question 72

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

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

Question 73

In the equation y = $7.20x + $790,"x" represents

A)number of units produced.
B)total fixed costs.
C)total costs.
D)none of the above.

Question 74

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

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

Question 75

An equation of a line for total mixed costs is

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

Question 76

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

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

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

An equation of a line for total costs is

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

Question 79

The representation for total variable costs is

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

Question 80

In the equation y = $11.75x + $550,"y" represents

A)total costs.
B)total fixed costs.
C)variable costs/unit.
D)none of the above.