Ch. 21

Cost behavior refers to the manner in which a cost changes as the related activity changes.

Total fixed costs change as the level of activity changes.

For purposes of analysis, mixed costs can generally be separated into their variable and fixed components.

Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours are an example of a fixed cost.

Variable costs are costs that remain constant in total dollar amount as the level of activity changes.

Variable costs are costs that vary on a per-unit basis with changes in the activity level.

A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

Cost behavior refers to the manner in which a cost

The three most common cost behavior classifications are

Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?

Which of the following describes the behavior of the fixed cost per unit?

Which of the following describes the behavior of a variable cost per unit?

As production increases, variable costs per unit

A low operating leverage is normal for highly automated industries.

The ratio that indicates the percentage of each sales dollar available to cover the fixed costs and to provide operating income is termed the contribution margin ratio.

If the property tax rates are increased, this change in fixed costs will result in a decrease in the break-even point.

Companies with large amounts of fixed costs will generally have a high operating leverage.

The reliability of cost-volume-profit analysis does not depend on the assumption that costs can be accurately divided into fixed and variable components.

Which of the following is an example of a cost that varies in total as the number of units produced changes?

In cost-volume-profit analysis, all costs are classified into which of the following two categories?

What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?