Question 1

Variable costs ________.

Accepted Answer

Variable costs are fixed per unit but vary in total with changes in the cost-driver activity level.

Question 2

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

Accepted Answer

When the cost-driver activity level increases within the relevant range, fixed costs per unit decrease because the total fixed costs are spread over more units.

Question 3

Only one cost driver may affect a cost at any given time.

Accepted Answer

Multiple cost drivers can affect a cost at any given time. Cost drivers are the factors that influence the costs of resources needed to perform an activity. They can include variables such as the volume of output, complexity of a product, technology used, skill level of employees, and many others. In order to accurately determine the cost of an activity or product, it is important to consider all relevant cost drivers.

Question 4

The relevant range is the limit of cost-driver level within which a specific relationship between costs and the cost driver is valid.

Accepted Answer

The relevant range is the range of activity levels over which the cost driver remains constant and within which a specific relationship between costs and the cost driver is valid.

Question 5

The relevant range applies to ________.

Accepted Answer

The relevant range applies to both fixed and variable costs, as it is the range of activity within which the assumptions about cost behavior (fixed or variable) hold true.

Question 6

Fixed costs ________.

Accepted Answer

Fixed costs are costs that do not vary with changes in the level of output, such as rent or insurance. They do not change per unit but remain constant in total, regardless of the level of production. Therefore, option B is the correct answer as fixed costs are fixed in total but vary on a per-unit basis.

Question 7

Costs may behave in a linear or a nonlinear manner.

Accepted Answer

Costs can behave either linearly or nonlinearly depending on the factors affecting them. For example, fixed costs may remain constant regardless of changes in production levels, resulting in a linear relationship with the volume of output, while variable costs may exhibit a nonlinear relationship with output due to economies of scale or other factors.

Question 8

The level of sales at which revenues equal expenses and net income is zero is called the ________.

Accepted Answer

The break-even point is the level of sales at which revenues equal expenses and net income is zero. This is an important concept in financial analysis as it helps businesses determine the minimum level of sales needed to cover their costs and make a profit. The other choices (margin of safety, contribution margin, and point of no return) do not refer to this specific concept.

Question 9

Cherry Wood Company sells desks at $480 per desk.The variable costs are $372 per desk.Total fixed costs for the period are $456,840.The contribution margin ratio is ________.

Accepted Answer

The answer of Cherry Wood Company sells desks at $480...

Question 10

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

Accepted Answer

When the cost-driver activity level decreases within the relevant range, total variable costs decrease because they are directly proportional to the level of activity.

Question 11

An accountant may have difficulty classifying costs as fixed or variable because ________.

Accepted Answer

All of the given options can create difficulty in classifying costs as fixed or variable. Costs may not behave in a linear way, meaning that they may not vary in direct proportion to the level of activity. Costs may also be affected by more than one cost driver, making it challenging to determine which driver is actually impacting the cost. Additionally, the classification of costs as fixed or variable may depend on the decision situation, as some costs may be classified as fixed in one context and variable in another.

Question 12

Which of the following costs is a fixed cost?

Accepted Answer

Factory supervisory salaries are a fixed cost because they do not change with changes in the level of production. The other options are variable costs because they are directly related to the amount of ice cream being produced or delivered.

Question 13

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

Accepted Answer

The answer of What happens when the cost-driver level increases...

Question 14

Walnut Corporation sells desks at $480 per desk.The variable costs associated with each desk are $372.Total fixed costs for the period are $456,840.The contribution margin per desk is ________.

Accepted Answer

Contribution margin per desk= Selling price per desk-Variable cost per desk
Contribution margin per desk= $480-$372 = $108

Therefore, the contribution margin per desk is $108.

Question 15

With very short time spans,more costs are fixed and fewer are variable.

Accepted Answer

In short time spans, there is less time to make changes to fixed costs, so they tend to be higher, while variable costs can be adjusted more easily in response to changes in demand or production levels, so they tend to be lower.

Question 16

Total fixed costs increase when volume increases in the relevant range.

Accepted Answer

Total fixed costs remain constant within the relevant range and do not change with changes in volume.

Question 17

Last year,XYZ Company sold 10,000 units that cost $40,000 to produce.This cost included $4,000 in fixed computer resource costs,$6,000 in fixed labor cost and $3.00 per unit for communications resource costs.XYZ Company expects to sell 20,000 units next year.Resource costs are expected to be in the same relevant range next year.What are the total estimated costs for next year?

Accepted Answer

The total estimated costs for next year are $70,000. This includes $10,000 in fixed computer resource costs, $6,000 in fixed labor cost, and $60,000 in variable communications resource costs (20,000 units x $3.00 per unit).

Question 18

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

Accepted Answer

Variable costs per unit remain unchanged because they are constant per unit of activity, regardless of the activity level within the relevant range.

Question 19

An increase in total variable costs usually indicates ________.

Accepted Answer

Total variable costs increase when the cost-driver activity level increases. This is because variable costs are those costs that vary with changes in the level of activity or production. As the level of activity increases, more resources are required, leading to an increase in variable costs. Therefore, an increase in total variable costs usually indicates that the cost-driver activity level is increasing.

Question 20

Hot Company,a producer of salsa,has the following information:  The contribution margin per unit is ________.

Accepted Answer

The given information does not provide the contribution margin per unit. Therefore, we cannot determine the answer from this information alone.

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

Variable costs ________.

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

Only one cost driver may affect a cost at any given time.

The relevant range is the limit of cost-driver level within which a specific relationship between costs and the cost driver is valid.

The relevant range applies to ________.

Fixed costs ________.

Costs may behave in a linear or a nonlinear manner.

The level of sales at which revenues equal expenses and net income is zero is called the ________.

Cherry Wood Company sells desks at $480 per desk.The variable costs are $372 per desk.Total fixed costs for the period are $456,840.The contribution margin ratio is ________.

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

An accountant may have difficulty classifying costs as fixed or variable because ________.

Which of the following costs is a fixed cost?

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

Walnut Corporation sells desks at $480 per desk.The variable costs associated with each desk are $372.Total fixed costs for the period are $456,840.The contribution margin per desk is ________.

With very short time spans,more costs are fixed and fewer are variable.

Total fixed costs increase when volume increases in the relevant range.

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

An increase in total variable costs usually indicates ________.

Hot Company,a producer of salsa,has the following information: The contribution margin per unit is ________.