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Seminar 11 Week 12 - 0902 - SOLUTIONS TO SELF STUDY...

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Page 2 of 4 SOLUTIONS TO SELF STUDY QUESTIONS 1 a) Cost behaviour analysis is the study of how specific costs respond to changes in the level of activity within a company. b) Cost behaviour analysis is important to management in planning business operations and in deciding between alternative courses of action. 4 a) The relevant range is the range of activity that a company expects to operate during the year. b) Disagree. The behaviour of both fixed and variable costs are linear only over a certain range of activity. Brief Exercise 15.3 1 a) $50 ($250 - $200) b) 20% ($50 / $250) 2 c) $380 ($500 – $120) d) 24% ($120 / $500) 3 e) $800 ($320 / 40%) f) $480 ($800 – $320) Exercise 15.2 Massey & Co a) The determination as to whether a cost is variable, fixed or mixed can be made by comparing the cost in total and on a per-unit basis at two different levels of production. Variable Costs Vary in total but remain constant on a per-unit basis. Fixed Costs Remain constant in total but vary on a per-unit basis.
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