When the level of activity decreases within relevant range the fixed cost per unit will?

ANSWER ALL THE GIVEN ITEMS. Write “True” if the statement is true and write “False” if the statement is false.

2. A variable cost will change in total in proportion to changes in the level of activity.
3. A fixed cost is constant per unit of product.
4. Cost accumulation, cost allocation, and cost objects are interrelated.
5. A variable cost remains constant per unit, though in total increases as activity levels increase.
6. If volume increases, both total variables and total fixed costs will increase.
7. Decrease in the level of activity will cause total variable and total fixed costs to decrease.
8. When graphed, total variable costs and total fixed costs are both assumed to be linear within
the relevant range.
9. Fixed cost is constant in total amount regardless of changes in activity level within the relevant
range.
10. Cost function is an express that mathematically links costs, their behavior, and their cost driver.
11. As volume decreases within the relevant range, variable cost per unit remains the same and
fixed cost per unit increases.
12. The relevant range of activity is the activity level at which the company makes the highest
amount profits.
13. Fixed costs per unit decline as the activity level increase within the relevant range of activity.
14. A period cost is defined as the cost incurred when asset is used up or sold for the purpose of
generating revenue.
15. Opportunity costs could be defined as the revenue lost when one alternative is not taken in
favor of another alternative.

exam 1 Fall14

Student:

___________________________________________________________________________

1. If the level of activity increases within the relevant range:

A. variable cost per unit and total fixed costs also increase.

B. fixed cost per unit and total variable cost also increase.

C. total cost will increase and fixed cost per unit will decrease.

D. variable cost per unit and total cost also increase.

2. Data for Cost A and Cost B appear below:

Which of the above best describes the behavior of Costs A and B?

A. Cost A is fixed, Cost B is variable.

B. Cost A is variable, Cost B is fixed.

C. Both Cost A and Cost B are variable.

D. Both Cost A and Cost B are fixed.

If the level of activity decreases within the relevant range, then:

A) fixed cost per unit will remain constant and total variable cost will decrease

B) variable cost per unit and total fixed cost will also decrease

C) variable cost per unit will decrease and total fixed cost will remain constant

D) variable cost per unit and total fixed cost will remain constant

Answer & Explanation

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38. An example of a fixed cost that would be considered a direct cost is:Source: CMA, adaptedLevel: HardLO: 6AACSB: AnalyticAICPA BB: Critical ThinkingAICPA FN: Reporting

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39. Which of the following statements concerning direct and indirect costs is NOTtrue?A) Whether a particular cost is classified as direct or indirect does not depend onthe cost object.B) A direct cost is one that can be easily traced to the particular cost object.C) The factory manager’s salary would be classified as an indirect cost ofproducing one unit of product.D) A particular cost may be direct or indirect, depending on the cost object.

When the level of activity decreases within the relevant range What is the fixed cost per unit?

What happens to fixed cost per unit as the activity level increases decreases?

When the level of activity decreases variable cost will?

What happens when fixed cost decreases?