1. Which one of the following refers to a cost that remains the same as the volume of activity decreases within the relevant range?
A. Average cost per unit.
B. Variable cost per unit.
C. Unit fixed cost.
D. Total variable cost.
2. The relevant range refers to the activity levels over which
A. Cost relationships hold constant.
B. Costs fluctuate.
C. Production varies.
D. Relevant costs are incurred.
3. When identifying fixed and variable costs, which one of the following is a typical assumption concerning cost behavior?
A. General and administrative costs are assumed to be variable costs.
B. Cost behavior is assumed to be realistic for all levels of activity from zero to maximum capacity.
C. Total costs are assumed to be linear when plotted on a graph.
D. The relevant time period is assumed to be 5 years.
4. A management accountant is about to prepare graphs of total variable cost and per-unit variable cost for use in a short-term planning model. Dollars will be depicted on the vertical axis; activity will be shown on the horizontal axis. How will these graphs appear under completion?
Total Variable Cost; Per-Unit Variable Cost
A. Straight line, sloping upward to the right; Straight line, parallel to the horizontal axis
B. Curvilinear, sloping upward to the right; A line that basically parallels the horizontal axis, first decreasing and then increasing
C. Straight line, sloping upward to the right; Straight line, sloping upward to the right
D. Straight line, parallel to the horizontal axis; Straight line, sloping upward to the right
5. A company has found that its total electricity cost has both a fixed component and a variable component within the relevant range. The variable component seems to vary directly with the number of units produced. Which one of the following statements concerning electricity cost is incorrect?
A. The total electricity cost will increase as production volume increases.
B. The total electricity cost per unit of production will increase as production volume increases.
C. The variable electricity cost per unit of production will remain constant as production volume increases.
D. The fixed electricity cost per unit of production will decline as production volume increases.
