Six Homework

# Six Homework - Module Two Chapter Five Homework Q 2-5 12-14...

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Module Two – Chapter Five Homework Q: 2-5, 12-14 P: 11, 13, and 15 Appendix 4 2. What effect does an increase in volume have on . . .? a. Unit fixed costs b. Unit variable costs c. Total fixed costs d. Total variable costs a. As activity increases, unit fixed costs decrease b. Unit variable costs remain constant during activity increase c. Total fixed costs remain constant through wide activity d. Total variable costs increase in proportion to activity volume increase 3. Cost Behavior – how a cost will change as the level of activity changes Relevant rage – range of activity within which the assumptions made about cost behavior are reasonable valid. 4. An activity base, aka cost driver, is whatever causes the incurrence of a variable cost. Ex: - If a purse factory receives a large order of purses, their labor costs will go up. The number of purses is ordered is the activity base. - If a city receives a quantitative amount of ice and snow, the city maintenance workers will be required to spend more hours salting and shoveling the roads. The activity base is the bad weather. 5. Distinguish between a) variable costs, b) mixed costs, and c) step-variable costs. a. A variable cost is a cost whose total dollar amount varies in direct proportion to activity level. b. Mixed costs are a combination of both variable and fixed costs.

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## This note was uploaded on 04/06/2011 for the course ACC 300 taught by Professor Barga during the Spring '11 term at St. Leo.

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Six Homework - Module Two Chapter Five Homework Q 2-5 12-14...

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