Deck 6: Cost Behavior

Question 1

1-2 Unit variable costs change as total production increases.

Answer 1

False

Question 2

1-11 When graphing total variable costs,the cost line always begins at the origin.

Answer 2

True

Question 3

1-17 Total mixed cost graphs slope upward,but do not begin at the origin.

Answer 3

True

Question 4

1-19 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 5

1-3 Mixed costs are part variable and part fixed.

Question 6

1-10 When graphing total fixed costs,the fixed cost per unit is the slope of the fixed cost line.

Question 7

1-15 Total mixed costs increase as volume increases because of the fixed cost component.

Question 8

1-14 When graphing total mixed costs,the cost line always begins at the origin.

Question 9

1-9 The variable cost per unit of activity increases as activity increases.

Question 10

1-4 Fixed costs per unit increase as production levels increase.

Question 11

1-20 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 12

1-8 Total variable costs change in direct proportion to changes in volume.

Question 13

1-12 The graph of a total variable cost will be a horizontal line.

Question 14

1-5 An expense such as advertising could be considered a discretionary fixed cost.

Question 15

1-6 The fixed cost per unit always remains the same.

Question 16

1-13 The fixed cost per unit of activity varies inversely with changes in volume.

Question 17

1-18 Total mixed cost graphs intersect the y-axis at the level of fixed costs.

Question 18

1-16 Mixed costs per unit decrease as volume increases because of the fixed cost component.

Question 19

1-7 The graph for total fixed costs will be a vertical line.

Question 20

1-1 Total fixed costs change in response to changes in the volume of production.

Question 21

1-31 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 22

1-25 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)All of the above may be characteristic of a variable cost.

Question 23

1-33 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 24

2-3 Cost behavior can be mathematically expressed using equations.

Question 25

1-21 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 26

1-34 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 27

2-4 The equation for a straight line is y = vx + f.

Question 28

1-22 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 29

1-35 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 30

1-28 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 31

1-26 Which of the following is a fixed cost?

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

Question 32

1-27 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 33

2-2 In the equation y = vx + f,the f represents the fixed costs.

Question 34

2-1 In the equation y = vx + f,the x represents the volume of activity.

Question 35

1-29 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 36

1-24 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 37

1-23 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 38

1-32 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 39

Selected financial data for Flash Corporation follows for a production level of 100,000 units:
$$\begin{array} { | l | r | } \hline \text { Total fixed costs } & \$ 400,000 \\\hline \text { Total costs (fixed and variable) } & \$ 500,000 \\\hline\end{array}$$ 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 40

1-30 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 41

An equation of a line for all costs is:

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

Question 42

2-12 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 43

2-14 Which of the following would be considered a committed fixed cost?

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

Question 44

2-6 The "averaging method" is a method that may be used to separate mixed costs into fixed and variable components.

Question 45

2-11 Managers often approximate curvilinear costs and step costs as mixed costs.

Question 46

2-5 At any given volume,average fixed costs must equal average variable costs.

Question 47

2-23 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 48

The following graph indicates which type of cost behavior?

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

Question 49

The representation for total variable costs is:

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

Question 50

2-7 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 51

2-17 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 behavior
C)Neither of the above
D)Both of the above

Question 52

2-22 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 53

2-16 Which of the following cost behaviors cannot be accurately represented by a single straight line?

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

Question 54

2-19 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 55

The equation for total fixed costs is:

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

Question 56

2-15 Management has little or no control over:

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

Question 57

2-10 Total mixed costs can be expressed as a combination of the variable and fixed cost equations.

Question 58

2-9 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 59

2-13 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

2-8 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 61

2-38 Fresh Best Friends produces 80,000 dog collars each month that give off a fresh scent to keep your dog smelling clean between baths.Total manufacturing costs are $240,000.Of this amount,$180,000 are variable costs.What are the total production costs when 100,000 collars are produced? (Assume both production levels are in the same relevant range.)

A)$285,000
B)$300,000
C)$465,000
D)$225,000

Question 62

2-33 In the equation y = $9.90x + $120,014,"x" represents

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

Question 63

2-43 The Clauson Company has total fixed costs of $400,000.They also have $120,000 in total variable costs.These costs exist at a production level of 80,000 units.The variable cost per unit is:

A)$3.50.
B)$6.50.
C)$5.00.
D)$1.50.

Question 64

2-44 The Clauson Company has total fixed costs of $400,000.They also have $120,000 in total variable costs.These costs exist at a production level of 80,000 units.The fixed cost per unit is:

A)$6.50.
B)$1.50.
C)$5.00.
D)$3.50.

Question 65

2-40 Feathered Nests produces decorative birdhouses.The company's average cost per unit is $20.00 when it produces 2,000 birdhouses.If $4,800 of the total costs are fixed,what is the variable cost of producing each birdhouse?

A)$ 2.40
B)$ 17.60
C)$ 20.00
D)$35,200

Question 66

2-29 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 67

2-34 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 68

2-27 In the equation: y = vx + f,what term represents the total cost?

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

Question 69

2-28 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

Question 70

2-31 Which of the following equations represents the total mixed cost?

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

Question 71

2-37 Plymouth Manufacturing produces cup holders.Total manufacturing costs are $400,000 when 40,000 holders are produced.Of this amount,total variable costs are $120,000.What are the total production costs when 60,000 holders are produced? (Assume the same relevant range for both production levels.)

A)$180,000
B)$600,000
C)$580,000
D)$460,000

Question 72

The following graphs indicate which type of cost behavior?

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

Question 73

2-30 In the equation: y = vx + f,what term represents the fixed cost component?

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

Question 74

2-26 In the equation: y = vx + f,what term represents the total variable cost component?

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

Question 75

2-32 In the equation y = $9.90x + $120,014,"y" represents:

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

Question 76

2-36 BestCalls has a special plan offer this month.There is a $4.00 per month charge each month and calls anywhere in the United States are $0.03 per minute.What would the monthly cost be if you typically talk for 500 minutes per month?

A)$11.00
B)$ 15.00
C)$ 19.00
D)$ 5.00

Question 77

2-41 Feathered Nests produces decorative birdhouses.The company's average cost per unit is $20.00 when it produces 2,000 birdhouses.If $4,800 of the costs are fixed,and the plant manager uses the average cost per unit to predict total costs,his forecast for 2,200 birdhouses will be:

A)$ 44,000.
B)$ 43,520.
C)$ 4,000.
D)$ 40,000.

Question 78

2-39 Feathered Nests produces decorative birdhouses.The company's average cost per unit is $20.00 at a production level of 2,000 birdhouses.What is the total cost of producing 2,000 birdhouses?

A)$20.00
B)$2,020
C)$40,000
D)$100

Question 79

2-42 Feathered Nests produces decorative birdhouses.The company's average cost per unit is $20.00 when it produces 2,000 birdhouses.If $4,800 of the costs are fixed,and the plant manager uses the cost equation to predict total costs,his forecast for 2,200 birdhouses will be:

A)$ 4,000.
B)$40,000.
C)$43,520.
D)$44,000.

Question 80

2-35 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