Cost behavior refers to the manner in which:
*a. a cost changes as the related activity changes b. a cost is allocated to products c. a cost is used in setting selling prices d. a cost is estimated 3370. The three most common cost behavior classifications are: a. variable costs, product costs, and sunk costs
*b. fixed costs, variable costs, and mixed costsOrder now
c. variable costs, period costs, and differential costs
d. variable costs, sunk costs, and opportunity costs 3371.
Costs that remain constant in total dollar amount as the level of activity changes are called:
*a. ixed costs
b. mixed costs
c. pportunity costs
d. variable costs 3372.
Which of the graphs in Figure 20-1 illustrates the behavior ofa total fixed cost?
a. Graph 2
b. Graph 3
c. Graph 4
*d. Graph 1 3373.
Which of the graphs in Figure 20-1 illustrates the behavior ofa total variable cost?
*b. Graph 3 3374.
Which of the graphs in Figure 20-1 illustrates the nature ofa mixed cost?
2 d. Graph 1 3375.
Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?
a. Direct labor
*b. Salary of a factory supervisor
c. Units of production depreciation on factory equipment . Direct materials 3376.
Which of the following describes the behavior of the fixed cost per unit?
*a. Decreases with increasing production
b. Decreases with decreasing production
c. Remains constant with changes in production
d. Increases with increasing production 3377.
Which of the following activity bases would be the most appropriate for food costs of a hospital?
a. Number of cooks scheduled to work
b. Number of x-rays taken
*c. Number of patients who stay in the hospital
d. Number of scheduled surgeries 3378.
Which of the following activity bases would be the most appropriate for asoline costs of a delivery service, such as United Postal Service?
a. Number of trucks employed
*b. Number of miles driven
c. Number of trucks in service
3379. Most operating decisions of management focus on a narrow range of activity called the:
*a. relevant range of production
b. strategic level of production
c. optimal level of production
d. tactical operating level of production
3380. Costs that vary in total in direct proportion to changes in an activity level are called:
a. fixed costs
b. sunk costs
*c. ariable costs
d. differential costs
3381. Which of the following is an example of a cost that varies in total as the number f units produced changes?
a. Salary of a production supervisor
*b. Direct materials cost
c. Property taxes on factory buildings
d. Straight-line depreciation on factory equipment
3382. Which of the following is NOT an example of a cost that varies in total as the number of units produced changes?
a. Electricity per KWH to operate factory equipment
b. Direct materials cost
*c. Straight-line depreciation on factory equipment
d. Wages of assembly worker
3383. Which of the following is NOT an example of a cost that varies in total as the
*c. Insurance premiums on factory building
3384. Which of the following describes the behavior of the variable cost per unit?
a. Varies in increasing proportion with changes in the activity level
b. Varies in decreasing proportion with changes in the activity level
*c. Remains constant with changes in the activity level
d. Varies in direct proportion with the activity level
3385. The graph of a variable cost when plotted against its related activity base appears as a:
*c. straight line d. urved line
3386. A cost that has characteristics of both a variable cost and a fixed cost is called
a. variable/fixed cost
*b. ixed cost
c. discretionary cost
d. sunk cost
3387. Which of the following costs is a mixed cost?
a. Salary of a factory supervisor
b. Electricity costs of $2 per kilowatt-hour
*c. Rental costs of $5,000 per month plus $. 30 per machine hour of use
d. Straight- line depreciation on factory equipment
3388. For purposes of analysis, mixed costs are generally:
a. classified as fixed costs
b. classified as variable costs
c. classified as period costs
*d. eparated into their variable and fixed cost components the year, 3,500 desks were manufactured at a total cost of $84,400.
In its slowest onth, the company made 1,100 desks at a cost of $46,000. Using the high-low method of cost estimation, total fixed costs are:
d. cannot be determined from the data given
3390. Given the following cost and activity observations for Bounty Company’s utilities, use the high-low method to calculate Bounty variable utilities costs per machine hour. Cost Machine Hours March $3,100 1 5,000 April 2,700 10,ooo May 2,900 12,000 June 3,600 18,000
a. $10. 00
b. $. 67
*d. $. 11
3391. Given the following cost and activity observations for Smithson Company’s tilities, use the high-low method to calculate Smithson’s fixed costs per month. Round variable cost per unit to two decimal places in your calculations. January $52,200 20,000 February 75,000 29,000 57,000 22,000 64,000 24,500
3392. Given the following cost and activity observations for Taco Company’s utilities, $8??00 10,400 July 7,200 August 9,500
b. $. 60
*c. $. 40
d. $. 52 3393. Manley Co. manufactures office furniture. During the most productive month of the year, 4,500 desks were manufactured at a total cost of $86,625.
In its slowest onth, the company made 1,800 desks at a cost of $49,500. Using the high-low a. $61875 b. $33875
3394. Which of the following statements is true regarding fixed and variable costs?
a. Both costs are constant when considered on a per unit basis.
b. Both costs are constant when considered on a total basis.
*c. Fixed costs are constant in total, and variable costs are constant per unit.
d. Variable costs are constant in total, and fixed costs vary in total.
3395. As production increases, what would you expect to happen to fixed cost per unit?
c. Remain the same
d. Either increase or decrease, depending on the variable costs
3396. Knowing how costs behave is useful to management for all the following reasons except for
*a. predicting customer demand.
b. predicting profits as sales and production volumes change.
c. estimating costs.
d. changing an existing product production.
3397. The manufacturing cost of Prancer Industries for three months of the year are provided below: Total Cost Production $ 60,700 1,200 units 80,920 1 ,800 100,300
a. $32. 30 per unit and $77,520 respectively.
*b. $33 per unit and $21,100 respectively.
c. 32 per unit and $76,800 respectively. . $32. 30 per unit and $22,780 respectively.
3398. As production increases, what should happen to the variable costs per unit?
*a. Stay the same.
d. Either increase or decrease, depending on the fixed costs.
3399. Cool-It Company manufactures and sells commercial air conditioners. Because of current trends, it expects to increase sales by 15 percent next year. If this expected level of production and sales occurs and plant expansion is not needed, how should this increase affect next year’s total amounts for the following costs.
Variable Costs increase o change decrease Fixed Costs Mixed Costs
3400. Given the following costs and activities for Downing Company electrical costs, use the high-low method to calculate Downings variable electrical costs per machine hour. Costs $11,700 $13,200 17,500 $11,400 14,500
a. $2. 08
b. $6. 00
*c. $0. 60
d. $1. 20
3401. The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed:
a. contribution margin analysis
*b. cost-volume-profit analysis
c. budgetary analysis
d. gross profit analysis
3402. In cost-volume-profit analysis, all costs are classified into the following two categories:
a. mixed costs and variable costs
b. sunk costs and fixed costs
c. discretionary costs and sunk costs
*d. variable costs and fixed costs
3403. Contribution margin is:
*a. the excess of sales revenue over variable cost
b. another term for volume in the “cost-volume-profit” analysis
d. the same as sales revenue
3404. The contribution margin ratio is:
a. the same as the variable cost ratio
b. the same as profit
c. the portion of equity contributed by the stockholders
*d. the same as the profit-volume ratio