Question 1

The fixed costs per unit will ________.

Accepted Answer

Fixed costs per unit increase as production decreases because the total fixed costs are spread over a smaller number of units, making the cost per unit higher.

Question 2

Which of the following statements is TRUE of the behavior of total fixed costs,within the relevant range?

Accepted Answer

Total fixed costs will remain constant within the relevant range, regardless of changes in production levels.

Question 3

Fixed cost per unit is assumed to be constant within a particular relevant range of activity.

Accepted Answer

Fixed cost per unit decreases as the level of activity or production increases within the relevant range, because the total fixed cost is spread over more units.

Question 4

Fixed costs per unit is inversely proportional to the volume of units produced.

Accepted Answer

This statement is true. As volume of units produced increases, fixed costs per unit decrease because the total fixed costs are spread over a larger number of units. Similarly, as volume of units produced decreases, fixed costs per unit increase because the total fixed costs are spread over a smaller number of units.

Question 5

Which of the following statements is TRUE of the behavior of total variable costs,within the relevant range?

Accepted Answer

Total variable costs decrease as production decreases because variable costs vary directly with the level of production. If production goes down, the costs associated with production (like materials and labor) also go down.

Question 6

If the volume of activity doubles in the relevant range,total variable costs will also double.

Accepted Answer

Total variable costs are directly proportional to the volume of activity. Thus, if the volume of activity doubles, the total variable costs will also double.

Question 7

Which of the following is a variable cost?

Accepted Answer

Direct materials cost is a variable cost because it varies directly with the level of production or sales. As production increases, the cost for direct materials will also increase. Property taxes, salary of plant manager, and straight-line depreciation expense are fixed costs because they do not change with the level of production or sales.

Question 8

Tentacle Television Antenna Company provided the following manufacturing costs for the month of June. $\begin{array}{|l|r|}
\hline\text { Direct labor cost } & \$ 132,000 \
\hline \text { Direct materials cost } & 84,000 \
\hline \text { Equipment depreciation } & \
\text { (straight-line) } & 24,000 \\hline \text { Factory insurance } & 10,000 \
\hline \text { Factory manager's salary } & 10,200 \
\hline \text { |anitor's salary } & 4000 \
\hline \text { Packaging costs } & 18,600 \
\hline \text { Property taxes } & 16,000\
\hline
\end{array}$ From the above information,calculate Tentacle's total fixed costs.

Accepted Answer

Fixed costs include equipment depreciation, factory insurance, factory manager's salary, janitor's salary, and property taxes. Adding these gives $24,000 + $10,000 + $10,200 + $4,000 + $16,000 = $64,200.

Question 9

Variable cost per unit,within the relevant range,will ________.

Accepted Answer

Variable cost per unit remains constant regardless of the level of production within the relevant range. This means that the cost per unit does not change as production levels increase or decrease.

Question 10

During the current year,Dubois,Inc.incurred $9,000 in fixed costs and $13,000 in variable costs.If the number of units produced is halved next year,the company will incur $4,500 as fixed costs and $6,500 as variable costs.

Accepted Answer

It is not possible to determine if the variable cost per unit will remain the same if the number of units produced is halved. Therefore, it is impossible to accurately predict the variable costs for the next year.

Question 11

Within the relevant range,the total fixed costs and the variable cost per unit remain the same.

Accepted Answer

Within the relevant range, total fixed costs do not change regardless of the level of activity, while the variable cost per unit remains constant with changes in activity level. This is one of the assumptions of the traditional cost-volume-profit analysis.

Question 12

Variable cost per unit is constant throughout various relevant ranges.

Accepted Answer

The answer of Variable cost per unit is constant throughout...

Question 13

A 15% increase in production volume will result in a ________.

Accepted Answer

A 15% increase in production volume would result in a proportional increase in the total variable costs. This is because as production volume increases, the total number of units being produced also increases, leading to an increase in the total variable costs required to produce each unit. Therefore, the correct answer is D - 15% increase in total variable costs.

Question 14

Total variable costs change in direct proportion to changes in the volume of production.

Accepted Answer

Total variable costs are costs that vary with the level of production, such as raw materials, direct labor, and utilities. As the volume of production increases, the total variable costs will increase proportionally. Therefore, total variable costs change in direct proportion to changes in the volume of production.

Question 15

Closet Links Clothing Company provided the following manufacturing costs for the month of June. $\begin{array}{|l|r|}
\hline\text { Direct labor cost } & \$ 138,000 \
\hline \text { Direct materials cost } & 85,000 \
\hline \text { Equipment depreciation } & \
\text { (straight-line) } & 24,000 \\hline \text { Factory insurance } & 19,000 \
\hline \text { Factory manager's salary } & 11,000 \
\hline \text { Tanitor's salary } & 3000 \
\hline \text { Packaging costs } & 19,200 \
\hline \text { Property taxes } & 14,000 \
\hline
\end{array}$ From the above information,calculate Closet Link's total variable costs.

Accepted Answer

The answer of Closet Links Clothing Company provided the following...

Question 16

Which of the following costs change in total in direct proportion to a change in volume?

Accepted Answer

Variable costs vary in total in direct proportion to a change in volume. This means that as the volume (or level of activity) goes up or down, the total cost of variable costs will also increase or decrease proportional to that change.

Question 17

Total fixed costs can change from one relevant range to another.

Accepted Answer

Total fixed costs can change if there is a change in the level of production or if there are changes in the business environment such as inflation or technological advancements. Therefore, fixed costs may be constant within a certain range of production but can change when there is a significant shift in the business environment or an increase in production beyond the current range.

Question 18

Fixed costs per unit decrease as production levels decrease.

Accepted Answer

Fixed costs are those costs that do not change with the level of production. Therefore, they remain constant per unit regardless of whether production levels increase or decrease.

Question 19

The high-low method requires the identification of the lowest and highest levels of total costs,not activity,over a period of time.

Accepted Answer

The high-low method requires the identification of the lowest and highest levels of activity, not total costs, over a period of time to estimate variable and fixed costs.

Question 20

Which of the following costs do NOT change in total despite changes in volume within the relevant range?

Accepted Answer

Fixed costs remain the same regardless of changes in volume within the relevant range.

Quiz 4: Cost-Volume-Profit Analysis