Question

1. Committed fixed costs are costs that can be changed easily in a relatively brief period of time. (True/False)

2. When the level of activity decreases, total variable costs

a. increase

b. decrease, but at a slower rate than the level of activity

c. a decrease in direct proportion to the decrease in activity

d. remain the same.

3. Which of the following components are included in a mixed cost?

a. A product cost and a period cost

b. A fixed cost and a variable cost

c. A step cost and a semivariable cost

d. A sunk cost and an opportunity cost

4. Within the relevant range, variable costs

a. are the same in total at different activity levels.

b. None of these answer choices are correct.

c. are the same amount per unit at any activity level.

d. per unit change when the activity level changes.

5. Step costs

a. change in total at every level of activity.

b. per unit are the same for each range of volume.

c. are classified as step variable or step fixed depending on the range of activity for which the cost remains fixed.

d. are considered to be step fixed costs within a relatively small range.

6. A cost is $34,500 at an activity level of 23,000 units and $42,000 at an activity level of 28,000 units. What type of cost is this?

a. Mixed Costs

b. Variable Costs

c. Fixed Costs

d. Sunk Cost

Answer 1

(1). False

Reason:- because commited fixed cost are the costs which cannot be changed easily. For example investment in building, top level manager salaries etc.

(2). The Answer is option (c): a decrease in direct proportion to the decrease in activity.

Reason:- because variable cost remains same at per unit. Hence if the level of output or activity decreases then the variable cost will also decrease in the direct proportion of decrease in activity level.

(3). The Answer is option (b): A fixed cost and a variable cost.

Reason:-​​​​​​ because Mixed costs are the costs which contains both fixed and variable cost. For example Utilities and your cell phone.

(4). The Answer is option (c): are the same amount per unit at any activity level.

Reason:- because variable cost remains same in per unit at any activity level, hence it decreases and increases as per the production level changes. For example Raw material cost, direct Expense of production etc.

(5). The Answer is option (c) : are classified as step variable or step fixed depending on the range of activity for which the cost remains fixed.

Reason:- because step costs remains constant at some point of level of activity, after which it can be decrease or increase depending upon the level of output.

(6). The Answer is option (b): Variable cost

Reason:- because as we know, variable cost remains same at per unit. Hence

For 23000 units variable cost is = $34500÷23000 units= $ 1.50 per unit

For 28000 units variable cost is= $42000÷$28000= $ 1.50 per unit