1.3 Cost Behavior and the Relevant Range

Question 1

Relevant range

Answer 1

Defines the limits in which per-unit variable cost remains constant and fixed costs are not changed (the short term)

Question 2

Variable costs per unit (in the short run)

Answer 2

remain constant regardless of the level of production

Question 3

Variable costs in total

Answer 3

Increase in direct proportion to the change in volume

Question 4

Fixed costs in total

Answer 4

remain unchanged in the short run regardless of production

Question 5

Fixed costs per unit

Answer 5

Decrease as activity level increases

Question 6

Mixed (Semi-variable) Costs

Answer 6

Combines fixed and variable elements (rental expense with a fixed monthly rate and per mile charge)

Question 7

What are two examples of non-linear cost function

Answer 7

Fixed cost per unit and step costing

Question 8

Step costing

Answer 8

Remains constant over small ranges of output, but increase by steps as activity level increases (Salary of production foremen. One shift a day might require 1 foreman while two shifts a day might require 2)

Question 9

What type of costs can display step costs

Answer 9

Both fixed and variable

Question 10

If the steps are relatively narrow how are step cost treated

Answer 10

As variable

Question 11

Marginal cost

Answer 11

The cost incurred by a one unit increase in the activity level of a particular cost driver (remain constant in the relevant range)

Question 12

In the long run all cost are what?

Answer 12

Variable