Cost Behavior

Question 1

Variable Costs

Answer 1

Varies in total as production volume increases/decreases

Constant on a per unit basis

Direct Materials and Direct Labor

Question 2

Fixed Costs

Answer 2

Constant in Total, Varies Per Unit

Ex. Depreciation

Question 3

Semi-variable Costs (Mixed Costs)

Answer 3

Costs that have both Fixed and Variable component (Water, Utilities)

Question 4

Relevant Range

Answer 4

graphical range for which assumptions of a cost driver are valid.

Question 5

Any cost driver outside the relevant range

Answer 5

can not be used to allocate costs to objects

Question 6

Over the long run

Answer 6

any costs is considered variable costs