Managerial Accounting Chapter 6
Which of the following would be considered a discretionary fixed cost?
Advertising
Fixed costs that are the result of previous management decisions that current managers have no control over in the short run are called ________ fixed costs.
Committed
Managers often approximate curvilinear costs and step costs as fixed costs.
False
Mixed costs per unit decrease as volume increases because of the variable cost component.
False
The fixed cost per unit does not always remain the same.
False
The graph of total variable cost will be a horizontal line over all activity levels within the relevant range.
False
The variable cost per unit of activity increases as activity increases.
False
When graphing total fixed costs, the cost line always begins at the origin.
False
When graphing total fixed costs, the fixed cost per unit is the slope of the fixed cost line.
False
For most businesses, annual straight line depreciation expense on the company's building is what type of cost?
Fixed
60,000 units 90,000 units Cost A $75,000 $75,000 Cost B $120,000 $180,000 Cost C $65,000 $80,000 Total Costs $260,000 $335,000
Fixed
If production increases by 30%, how will total variable costs likely react?
Increase by 30%
Renting a scooter and paying $30 per day plus $.20 per mile driven is an example of what type of cost?
Mixed Cost
If production increases by 25%, how will total fixed costs likely react?
Remain the same
Which of the following costs is an example of a fixed cost?
Salary of Plant Manager
Which of the following cost behaviors cannot be accurately represented by a single straight line?
Step Costs
Which of the following is a fixed cost?
Straight-line depreciation expense
Managers should consider which of the following when predicting costs at different volumes?
The type of cost behavior The relevant range of the cost
Variable costs are described by which of the following statements?
They are fixed per unit and vary in total.
With respect to total variable costs, which of the following statements is true?
They will decrease as production decreases within the relevant range.
Within the relevant range, which of the following statements is true with respect to fixed costs per unit?
They will increase as production decreases.
With respect to total fixed costs, which of the following statements is true?
They will remain the same as production levels change within the relevant range.
With respect to variable costs per unit, which of the following statements is true?
They will remain the same as production levels change within the relevant range.
An expense such as advertising could be considered a discretionary fixed cost.
True
Fixed costs per unit decrease as production levels increase.
True
In a manufacturing company, fixed costs remain the same at many different production levels within the relevant range.
True
Mixed costs are purely fixed.
True
Relevant range is the range of activity (volume) over which total fixed costs and variable costs per unit can be assumed to remain the same.
True
The fixed cost per unit of activity varies with changes in volume.
True
The line on a graph representing total fixed costs will be a horizontal line.
True
Total fixed costs do not change in response to changes in the volume of production.
True
Total mixed cost graphs intersect the y-axis at the level of fixed costs.
True
Total mixed cost graphs slope upward but do not begin at the origin.
True
Total mixed costs increase as volume increases because of the variable cost component.
True
Total variable costs change in direct proportion to changes in volume.
True
Unit variable costs do not change as total production increases.
True
When graphing total variable costs, the cost line begins at the origin.
True
A(n) ________ cost is a cost whose total amount changes in direct proportion to a change in volume.
Variable
Which of the following is a characteristic of a variable cost?
Variable costs fluctuate in total with production and sales.
Management has little or no control over
committed fixed costs.