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Chapter 6-11 Study Questions

# Chapter 6-11 Study Questions - 34 An increase in the level...

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34. An increase in the level of activity will have the following effects on unit costs for variable and fixed costs: Unit Variable Cost, Unit Fixed Cost a. Increase, Decrease b. Remains constant Remains constant c. Decrease Remains constant d. Remains constant Decrease 40. If a firm increases its activity level, 44. If the activity level increases 10%, total variable costs will 45. Which of the following costs are variable? Cost 5,000 Units 15,000 Units 1 \$100,000 \$300,000 2 40,000 240,000 3 90,000 90,000 4 50,000 150,000 50. Firms operating at 100% capacity a. are common. b. are the exception rather than the rule. c. have no fixed costs. d. have no variable costs. 56. At the high level of activity in November, 7,000 machine hours were run and power costs were \$12,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounted to \$6,000. Using the high-low method, the estimated fixed cost element of power costs is 57. Wynne Company’s high and low level of activity last year was 60,000 units of product produced in May and 20,000 units produced in November. Machine maintenance costs were \$39,000 in May and \$15,000 in November. Using the high-low method, determine an estimate of total maintenance cost for a month in which production is expected to be 45,000 units. 61. If American Airlines cuts its domestic fares by 30%, 62. In applying the high-low method, which months are relevant? a. January and February b. January and April c. February and April d. February and March 63. In applying the high-low method, what is the unit variable cost? 68. In CVP analysis, the term “cost”

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