Week 1 (Cost Behavior)

Question 1

term used to describe how costs change (react) to changes in the volume of activity (very useful in management decision-making)
what is this ?

Answer 1

cost behavior

Question 2

What are the 3 classifications of costs in cost behavior analysis ?

Answer 2

1. variable costs
2. fixed costs
3. mixed costs

Question 3

variable costs ________ change in direct proportion to changes in the volume of activity ?

Answer 3

in total

Question 4

variable costs _______ are constant meaning they do not change when the volume of activity changes ?

Answer 4

per unit

Question 5

direct material and direct labor are examples of what ?

Answer 5

variable costs

Question 6

fixed costs ________ are constant meaning they do not change when the volume of activity changes ?

Answer 6

in total

Question 7

fixed costs ________ change inversely with changes in the volume of activity (as the volume of activity increases, fixed costs per unit decrease) ?

Answer 7

per unit

Question 8

depreciation, rent, and advertising are typically examples of what ?

Answer 8

fixed costs

Question 9

are costs that contain both a variable and a fixed element
what is this ?

Answer 9

mixed costs

Question 10

because mixed costs have both variable and fixed components neither the total cost nor the unit cost is ?

Answer 10

constant

Question 11

utilities and overhead are typically examples of ?

Answer 11

mixed costs

Question 12

1. the cost behaviors we have just discussed are assumed to exist over a relevant range
2. the cost behavior patterns we have discussed are assumed to be linear within the relevant range (the cost behavior pattern will plot as a straight line within the relevant range)
   what are these ?

Answer 12

Cost behavior assumptions

Question 13

the cost behaviors we have just discussed are assumed to exist over a ?

Answer 13

relevant range

Question 14

the range of activity within which the assumptions made about cost behaviors by managers are valid
what is this ?

Answer 14

relevant range

Question 15

the cost behavior patterns we have discussed are assumed to be _____ within the relevant range ?

Answer 15

linear

Question 16

what does cost behavior analysis allows managers to develop ?

Answer 16

expectations of costs at any level of activity

Question 17

mangers should use variable costs expressed on a ___
and fixed costs in ______ ?

Answer 17

-variable costs on a per unit basis
-fixed costs in total

Question 18

why should managers use variable costs expressed on a per-unit basis and fixed costs in total?

Answer 18

both variable costs per unit and total fixed costs are considered constant at all activity levels

Question 19

method used to separate a mixed cost into its fixed and variable components
what is this ?

Answer 19

high-low method

Question 20

the amount of revenue that is available to:
1. pay (cover) fixed costs
2. contribute toward a profit
what is this ?

Answer 20

contribution margin