Question 1

As cost-driver level increases in the relevant range,a fixed cost does not change ________,but the fixed cost ________ becomes progressively smaller.
A) per unit of cost driver; total
B) in total; per unit of cost driver
C) per-unit; per unit of cost driver
D) in total; per year

Accepted Answer

Fixed costs do not change in total as the level of activity (cost-driver level) increases within the relevant range, but the fixed cost per unit of cost driver decreases because the same total fixed cost is spread over more units.

Question 2

As cost-driver level decreases in the relevant range,fixed costs per unit of cost driver ________,but total fixed costs ________.
A) increase; do not change
B) decrease: do not change
C) do not change; increase
D) do not change; decrease

Accepted Answer

As cost-driver level decreases in the relevant range, fixed costs are spread across fewer units of the cost driver, resulting in an increase in fixed costs per unit. However, the total fixed costs remain the same as it is not affected by changes in the cost driver level.

Question 3

Total fixed costs increase when the cost-driver level increases in the relevant range.

Accepted Answer

Total fixed costs remain the same regardless of the cost-driver level in the relevant range. This is because fixed costs are those expenses that do not vary with changes in the level of production or sales activity. However, the fixed cost per unit may decrease as the cost-driver level increases, since the total fixed cost is spread over a larger number of units.

Question 4

Why is it important to identify the most appropriate cost drivers for a particular product?
A) so managers can identify the activities necessary to manufacture a product
B) so managers can control product costs better
C) so managers can predict product costs better and make better decisions
D) B and C

Accepted Answer

Identifying the most appropriate cost drivers for a particular product enables managers to control the product costs better and predict the product costs accurately, which in turn helps them make better decisions about the product.

Question 5

Janitors clean the factory with scrubbing machines and polishing machines.Scrubbing machines scrub the factory floor and polishing machines polish the floor.The cost associated with cleaning the factory is treated as a product cost.What is a good cost driver for the Depreciation Expense associated with the scrubbing and polishing machines?
A) number of janitors operating machines
B) number of labor hours put in by janitors
C) number of kilowatt hours used
D) number of machine hours used

Accepted Answer

The best cost driver for the Depreciation Expense associated with the scrubbing and polishing machines is the number of machine hours used. This is because the depreciation expense of the machines is directly proportional to the number of hours they are used for. Therefore, using the number of machine hours as the cost driver will result in a more accurate allocation of the depreciation expense to the products being produced in the factory.

Question 6

What happens when the cost-driver level increases within the relevant range?
A) Total fixed costs remain unchanged.
B) Fixed costs per unit of cost driver increase.
C) Total variable costs decrease.
D) Variable costs per unit of cost driver increase.

Accepted Answer

Total fixed costs remain unchanged when the cost-driver level increases within the relevant range, as fixed costs do not vary with the level of production or activity.

Question 7

Consider the following activity: The installation of seats by an airplane manufacturer in a commercial airplane.What is an appropriate cost driver for the labor resources used for this activity?
A) number of service center hours
B) number of labor hours used to install seats
C) number of mechanic hours
D) number of engineering hours

Accepted Answer

The appropriate cost driver for the labor resources used for the installation of seats in a commercial airplane is the number of labor hours used to install the seats. This is because the amount of labor hours required to install the seats is directly proportional to the labor costs associated with the activity.

Question 8

Consider the following activity: The manufacturer in a commercial airplane.What is an appropriate cost driver for the cost of the seats?
A) number of seats installed
B) number of labor hours used to install seats
C) number of mechanic hours
D) number of engineering hours

Accepted Answer

The cost of the seats is directly proportional to the number of seats installed in the airplane. Therefore, the appropriate cost driver for the cost of the seats would be the number of seats installed. The other options do not have a direct correlation with the cost of the seats.

Question 9

Which of the following costs is a fixed cost?
A) cost of dairy ingredients used to produce ice cream
B) depreciation expense on factory building
C) fuel used by delivery trucks
D) labor wages of workers who mix dairy ingredients to make ice cream

Accepted Answer

Depreciation expense on factory building is a fixed cost as it does not change with the level of production.

Question 10

As the cost-driver level increases in the relevant range,variable costs per unit of cost driver ________ but total variable costs ________.
A) do not change; increase in direct proportion to the cost-driver activity level
B) do not change; decrease in direct proportion to the cost-driver activity level
C) increase; do not change
D) decrease; do not change

Accepted Answer

Variable costs per unit remain constant as the level of activity changes within the relevant range, but the total variable costs increase in direct proportion to the level of activity or cost-driver.

Question 11

The relevant range applies to ________.
A) variable costs only
B) fixed costs only
C) fixed costs and variable costs
D) none of the above

Accepted Answer

Relevant range applies to both fixed and variable costs. It is the range of activity or level of output over which the assumptions made about cost behavior are valid. Beyond this range, cost behavior may change due to factors such as capacity constraints or economies of scale. Therefore, the relevant range is important in making managerial decisions related to costs and pricing.

Question 12

Within the relevant range,the total amount of ________ cost changes in direct proportion to changes in the cost driver.Within the relevant range,the total amount of ________ cost does not change in direct proportion to changes in the cost driver.
A) fixed; variable
B) variable; fixed
C) step; mixed
D) mixed; step

Accepted Answer

Within the relevant range, the total amount of variable cost changes in direct proportion to changes in the cost driver, meaning as the level of activity or volume increases, variable costs will increase at a constant rate per unit. Conversely, the total amount of fixed cost does not change in direct proportion to changes in the cost driver, meaning fixed costs remain constant regardless of changes in the level of activity or volume within the relevant range.

Question 13

What happens when the cost-driver activity level decreases within the relevant range?
A) Total fixed costs increase.
B) Fixed costs per unit of cost driver decrease.
C) Total variable costs decrease.
D) Variable costs per unit of cost driver decrease.

Accepted Answer

When the cost-driver activity level decreases within the relevant range, total variable costs decrease because variable costs vary directly with the level of activity.

Question 14

Cost drivers are ________.
A) the different functions in the value chain
B) different types of functional areas in the firm
C) measures of activities that require the use of resources and thereby cause costs
D) different types of cost calculations

Accepted Answer

Cost drivers are measures of activities that require the use of resources and thereby cause costs. They are used to identify the root causes of costs in order to make better business decisions and improve efficiency. Option A and B refer to different functions or functional areas within an organization, while option D refers to different methods of calculating costs, none of which accurately describe cost drivers.

Question 15

What happens when the cost-driver activity level increases within the relevant range?
A) Total fixed costs increase.
B) Fixed costs per unit of cost driver decrease.
C) Total variable costs decrease.
D) Variable costs per unit of cost driver decrease.

Accepted Answer

When the cost-driver activity level increases within the relevant range, fixed costs remain the same because they do not vary with changes in the activity level. However, variable costs tend to increase with an increase in the activity level. As a result, the fixed costs get spread over more units of the cost driver, causing fixed costs per unit of cost driver to decrease. Therefore, option B is the correct answer.

Question 16

A brainstorming group in the Research and Development area is charged with developing new product ideas for the company.What is a good cost driver of the cost of this activity?
A) number of parts in new products proposed
B) number of new product proposals
C) number of workers
D) number of engineering hours

Accepted Answer

The number of new product proposals directly influences the cost of the brainstorming activity, as more proposals generally require more resources, time, and analysis, making it a good cost driver for this activity.

Question 17

An increase in total variable costs usually indicates that ________.
A) the cost-driver activity level is decreasing
B) the cost-driver activity level is increasing
C) variable costs per unit is decreasing
D) fixed costs per unit is increasing

Accepted Answer

Total variable costs are directly related to the cost-driver activity level. As the activity level increases, there is usually a corresponding increase in total variable costs. Therefore, an increase in total variable costs usually indicates that the cost-driver activity level is increasing.

Question 18

Which of the following costs is a variable cost?
A) rental expense for factory building for manufacturer of electronics
B) lease cost for factory machine for manufacturer of electronics
C) fuel for airplane for airline
D) depreciation expense of airplane for airline

Accepted Answer

Fuel for an airplane for an airline is a variable cost because it varies with the level of activity or volume, such as the number of flights operated.

Question 19

What happens when the cost-driver activity level decreases within the relevant range?
A) Total fixed costs increase.
B) Fixed costs per unit of cost driver decrease.
C) Total variable costs increase.
D) Variable costs per unit of cost driver are unchanged.

Accepted Answer

When the cost-driver activity level decreases within the relevant range, the variable costs per unit remain unchanged because variable costs per unit are constant within the relevant range.

Question 20

Janitors clean the factory at the end of each workday.The wages of the janitors are used to determine the cost of the only manufactured product in the factory.What is a good cost driver for the wages of the janitors?
A) number of janitors
B) number of kilowatt hours used
C) number of machine hours on cleaning machines
D) number of labor hours worked by janitors

Accepted Answer

The number of labor hours worked by janitors is the best choice for a cost driver for their wages, as it directly reflects the amount of time and effort they are putting into cleaning the factory. The other options are not as relevant or directly related to the janitors' work.

Quiz 2: Introduction to Cost Behavior and Cost Volume Profit Relationships

As cost-driver level increases in the relevant range,a fixed cost does not change ,but the fixed cost becomes progressively smaller.

As cost-driver level decreases in the relevant range,fixed costs per unit of cost driver ,but total fixed costs .

Total fixed costs increase when the cost-driver level increases in the relevant range.

Why is it important to identify the most appropriate cost drivers for a particular product?

What happens when the cost-driver level increases within the relevant range?

Consider the following activity: The installation of seats by an airplane manufacturer in a commercial airplane.What is an appropriate cost driver for the labor resources used for this activity?

Consider the following activity: The manufacturer in a commercial airplane.What is an appropriate cost driver for the cost of the seats?

Which of the following costs is a fixed cost?

As the cost-driver level increases in the relevant range,variable costs per unit of cost driver but total variable costs .

The relevant range applies to ________.

Within the relevant range,the total amount of cost changes in direct proportion to changes in the cost driver.Within the relevant range,the total amount of cost does not change in direct proportion to changes in the cost driver.

What happens when the cost-driver activity level decreases within the relevant range?

Cost drivers are ________.

What happens when the cost-driver activity level increases within the relevant range?

A brainstorming group in the Research and Development area is charged with developing new product ideas for the company.What is a good cost driver of the cost of this activity?

An increase in total variable costs usually indicates that ________.

Which of the following costs is a variable cost?

What happens when the cost-driver activity level decreases within the relevant range?

Janitors clean the factory at the end of each workday.The wages of the janitors are used to determine the cost of the only manufactured product in the factory.What is a good cost driver for the wages of the janitors?