cost behaviour analysis

Question 1

activity index

Answer 1

identifi es the activity that causes changes in the behavior of costs

Question 2

variable costs

Answer 2

VARY IN TOTAL DIRECTLY AND PROPORTIONALLY

REMAINS THE same AT PER UNIT LEVEL

Question 3

fixed costs

Answer 3

REMAINS THE SAME IN TOTAL

Vary at the unit level

Question 4

f a relationship is linear (that is, straight-line), then
changes in the activity index will result in a direct, proportional change in the
variable cost.

Question 5

in the real world, the relationship between the behavior of a variable cost and changes in the activity level is often curvilinear

Question 6

Relevant Range

Answer 6

The range over which a company
expects to operate during a year

THE relevant range of the activity index

range is usually 40-80%

Question 7

MIXED COSTS

Answer 7

change in total but not proportionately with changes
in the activity level.

Question 8

high low method

Answer 8

usued to idnetify fixed cost and variable costs!

Question 9

high low method steps

Answer 9

1. determine vc per unit:

CHANGE in total costs / (High-Low activity level) = VC per unit

2. determine fc per unit:

(high activity level total cost)-(high total vc)

(low activity level total cost)- (low total vc)

both will give same answer!!! so you can find fixed cost. TO GET TOTAL VC for either, (high units * vc per unit)

3. get the forula

Question 10

scattergraph variable cost formula (slope)

Answer 10

y-axis: price
x-axis: units

price 2- price 1/ unit2- unit1