Chapter 5: Cost Volume Profit

Question 1

Variable costs

Answer 1

Direct Material
Increases or decreases in total in direct proportion to increase or decreases.

• business action: number of units sold, produced
• *total variable costs fluctuate, but variable costs stay the same**

Question 2

Fixed costs

Answer 2

Remans the sane in total regardless of change in sales.
Ex: rents salaries, property taxes and depreciation

Question 3

Mixed costs

Answer 3

Have both a variable and fixed component

ex: Being a salary employee and getting commission

Question 4

High low method

Answer 4

Separates mixed costs into theirvariable and fixed components, using highest and lowest activity or volume

Question 5

High your method steps

Answer 5

Step 1. Identify highest and volume levels

(Highest cost — lowest cost)/(Highest cost lowest cost)

Step 2. Calculate totalfixed costs

Total mixes cost — total variable costs
Total mixed cost—(variable per unit * number of units)

step 3. Create an equation to show mixed cost behavior.

Total mixed cost=(variable per unit * number of units fixed cost)

Question 6

Sales mix

Answer 6

Combination of products that make up total sales.