Cost Behavior and Variable Costs Quiz
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Cost Behavior and Variable Costs Quiz

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@SnappyBongos

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Questions and Answers

Which type of cost changes in proportion to changes in the activity base?

  • Fixed costs
  • Direct material costs
  • Variable costs (correct)
  • Mixed costs

    • What is the characteristic of fixed costs with respect to cost per unit as the activity level increases?

  • Increases
  • Decreases (correct)
  • Remains the same
  • Fluctuates

    • Which method is used to separate mixed costs into their fixed and variable components?

  • Activity-Based Costing Method
  • High-Low Method (correct)
  • Fixed-Cost Allocation Method
  • Straight-Line Depreciation Method

    • What are the characteristics of mixed costs?

    <p>Have features of both variable and fixed costs</p> Signup and view all the answers

    What is the formula to calculate the unit contribution margin?

    <p>Sales Price per Unit - Variable Cost per Unit</p> Signup and view all the answers

    How do increases in fixed costs affect the break-even point?

    <p>Increase the break-even point</p> Signup and view all the answers

    What is the Contribution Margin Ratio formula?

    <p>Contribution Margin / Sales</p> Signup and view all the answers

    How do decreases in unit variable costs affect the break-even point?

    <p>Decrease the break-even point</p> Signup and view all the answers

    What is the purpose of cost-volume-profit analysis?

    <p>To examine relationships among selling prices, sales volume, costs, and profits</p> Signup and view all the answers

    How does an increase in unit selling price affect the break-even point?

    <p>Increase the break-even point</p> Signup and view all the answers

    Study Notes

    Cost Classification

    • Variable costs change in proportion to changes in the activity base.

    Fixed Costs

    • Fixed costs per unit decrease as the activity level increases.

    Mixed Costs

    • Mixed costs have both fixed and variable components.
    • The High-Low Method is used to separate mixed costs into their fixed and variable components.
    • Characteristics of mixed costs: they have both fixed and variable components, and the total cost remains constant within a certain range of activity.

    Contribution Margin

    • The formula to calculate the unit contribution margin is: Selling Price - Variable Costs.
    • The Contribution Margin Ratio formula is: (Selling Price - Variable Costs) / Selling Price.

    Break-Even Point

    • Increases in fixed costs increase the break-even point.
    • Decreases in unit variable costs decrease the break-even point.
    • An increase in unit selling price decreases the break-even point.

    Cost-Volume-Profit Analysis

    • The purpose of cost-volume-profit (CVP) analysis is to examine the relationships between a company's costs, volume, and profitability.

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    Description

    Test your knowledge on how costs change with related activities and the concept of variable costs. Learn about identifying activities that affect cost changes and specifying relevant activity ranges.

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