KA2e_SelfStudy_Ch18

KA2e_SelfStudy_Ch18 - File:ch18,Chapter18:CostVolumeProfit...

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File: ch18, Chapter 18: Cost-Volume-Profit Multiple Choice 1. Variable costs are costs that: a) vary in total directly and proportionately with changes in the activity level. b) remain the same per unit at every activity level. c) Neither of the above. d) Both a) and b) above. Ans: d Response A: Variable costs vary in total directly and proportionately with changes in the activity level, but d is a better answer. Response B: Variable costs remain the same per unit at every activity level, but d is a better answer. Response C: Since both a and b are correct, this answer cannot be correct. Response D: Correct! Variable costs vary in total directly and proportionately with changes in the activity level and remain the same per unit at every activity level. 2. The relevant range is: a) the range of activity in which variable costs will be curvilinear. b) the range of activity in which fixed costs will be curvilinear. c) the range over which the company expects to operate during a year. d) usually from zero to 100% of operating capacity. Ans: c Response A: The relevant range is the range over which variable costs are expected to be linear, not curvilinear. Response B: The relevant range is the range over which the company expects fixed costs to remain the same. Response C: Correct! The relevant range is the range over which the company expects to operate during a year. Response D: While the relevant range is somewhere within this range, this answer does not define relevant range. Answer c is a better answer. 3. Mixed costs consist of a: a) variable cost element and a fixed cost element. b) fixed cost element and a controllable cost element. c) relevant cost element and a controllable cost element. d) variable cost element and a relevant cost element. Ans: a Response A: Correct! Mixed costs consist of a variable cost element and a fixed cost element. Response B: Mixed costs consist of a fixed cost element and a variable cost element, not a controllable cost element. Response C: Mixed costs consist of a variable cost element, not a relevant cost element, and a fixed cost element, not a controllable cost element. Response D: Mixed costs consist of a variable cost element and a fixed cost element, not a relevant cost element.
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4. Kendra Corporation’s total utility costs during the past year were $1,200 during its highest month and $600 during its lowest month. These costs corresponded with 10,000 units of production during the high
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This note was uploaded on 04/22/2009 for the course BCOR 2000 taught by Professor Brush during the Spring '07 term at Colorado.

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KA2e_SelfStudy_Ch18 - File:ch18,Chapter18:CostVolumeProfit...

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