ACTIVITY ANALYSIS,COST – BEHAVIOUR AND COST ESTIMATI

ACTIVITY ANALYSIS,COST – BEHAVIOUR AND COST ESTIMATION

Multiple Choice Questions

1. The relationship between cost and activity is termed:

A. cost estimation.

B. cost prediction.

C. cost behavior.

D. cost analysis.

E. cost approximation

2. Which of the following costs changes in direct proportion to a change in the activity level?

A. Variable cost.

B. Fixed cost.

C. Semivariable cost.

D. Step-variable cost.

E. Step-fixed cost.

3. Montgomery Company has a variable selling cost. If sales volume increases, how will the total variable cost and the variable cost per unit behave?

	Total Variable Cost	Variable Cost Per Unit
A.	Increase	Increase
B.	Increase	Remain constant
C.	Increase	Decrease
D.	Remain constant	Decrease
E.	Decrease	Increase

4. What type of cost exhibits the behavior that follows?

Manufacturing Volume (Units)	Cost Per Unit
50,000	$1.95
70,000	1.95

A. Variable cost.

B. Fixed cost.

C. Semivariable cost.

D. Discretionary fixed cost.

E. Step-fixed cost

5. Plaza Corporation observed that when 25,000 units were sold, a particular cost amounted to $70,000, or $2.80 per unit. When volume increased by 15%, the cost totaled $80,500 (i.e., $2.80 per unit). The cost that Plaza is studying can best be described as a:

A. variable cost.

B. fixed cost.

C. semivariable cost.

D. discretionary fixed cost.

E. step-fixed cost.

6. A company observed a decrease in the cost per unit. All other things being equal, which of the following is probably true?

A. The company is studying a variable cost, and total volume has increased.

B. The company is studying a variable cost, and total volume has decreased.

C. The company is studying a fixed cost, and total volume has increased.

D. The company is studying a fixed cost, and total volume has decreased.

E. The company is studying a fixed cost, and total volume has remained constant.

7. Webster has the following budgeted costs at its anticipated production level (expressed in hours): variable overhead, $150,000; fixed overhead, $240,000. If Webster now revises its anticipated production slightly downward, it would expect:

A. total fixed overhead of $240,000 and a lower hourly rate for variable overhead.

B. total fixed overhead of $240,000 and the same hourly rate for variable overhead.

C. total fixed overhead of $240,000 and a higher hourly rate for variable overhead.

D. total variable overhead of less than $150,000 and a lower hourly rate for variable overhead.

E. total variable overhead of less than $150,000 and a higher hourly rate for variable overhead.

8. What type of cost exhibits the behavior that follows?

Manufacturing Volume (Units)	Total Cost	Cost Per Unit
50,000	$150,000	$3.00
80,000	150,000	1.88

A. Variable cost.

B. Fixed cost.

C. Semivariable cost.

D. Step-variable cost.

E. Mixed cost.

9. When graphed, a typical variable cost appears as:

A. a horizontal line.

B. a vertical line.

C. a u-shaped line.

D. a diagonal line that slopes downward to the right.

E. a diagonal line that slopes upward to the right.

10. Norman Company pays a sales commission of 5% on each unit sold. If a graph is prepared, with the vertical axis representing per-unit cost and the horizontal axis representing units sold, how would a line that depicts sales commissions be drawn?

A. As a straight diagonal line, sloping upward to the right.

B. As a straight diagonal line, sloping downward to the right.

C. As a horizontal line.

D. As a vertical line.

E. As a curvilinear line.

11. When graphed, a typical fixed cost appears as:

A. a horizontal line.

B. a vertical line.

C. a u-shaped line.

D. a diagonal line that slopes downward to the right.

E. a diagonal line that slopes upward to the right.

12. Costs that remain the same over a wide range of activity, but jump to a different amount outside that range, are termed:

A. step-fixed costs.

B. step-variable costs.

C. semivariable costs.

D. curvilinear costs.

E. mixed costs.

13. Straight-line depreciation is a typical example of a:

A. variable cost.

B. step-variable cost.

C. fixed cost.

D. mixed cost.

E. curvilinear cost.

14. Which of the following choices denotes the typical cost behavior of advertising and sales commissions?

	Advertising		Sales Commissions
A.	Variable		Variable
B.	Variable		Fixed
C.	Fixed		Variable
D.	Fixed		Fixed
E.	Semivariable		Variable

15. Douglas Corporation recently produced and sold 100,000 units. Fixed costs at this level of activity amounted to $50,000; variable costs were $100,000. How much cost would the company anticipate if during the next period it produced and sold 102,000 units?

A. $150,000.

B. $151,000.

C. $152,000.

D. $153,000.

E. Some other amount not listed above.

16. Extron, Inc., has only variable costs and fixed costs. A review of the company’s records disclosed that when 100,000 units were produced, fixed manufacturing costs amounted to $200,000 and the cost per unit manufactured totaled $5. On the basis of this information, how much cost would the firm anticipate at an activity level of 97,000 units?

A. $485,000.

B. $491,000.

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