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# 15_AdditionalStudyQuestions - ACC 333(Farrell Class 15 Fall...

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ACC 333 (Farrell) Class 15 Fall 2011 Page 1 of 5 Additional Study Questions – Overview of Cost Concepts 1) Cost behavior For the graphs below, the vertical axes represent total dollars of cost, and the horizontal axes represent production output during a calendar year. In each case, the zero point of dollars and production is at the intersection of the two axes. Indicate by letter which of the graphs best shows the cost behavior of the situations/items described in the table on the next page (the graphs may be used as answers more than once). A B C D E F G H I J K L

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ACC 333 (Farrell) Class 15 Fall 2011 Page 2 of 5 Graph Which Best Shows Cost Behavior i. Annual depreciation of equipment, where the amount is computed by the straight-line method. ii. Annual depreciation of equipment, where the amount of depreciation charged is computed by the machine-hours method. iii. Electricity bills are a flat fixed charge, plus a variable cost after a certain number of kilowatt-hours are used, where the quantity of kilowatt-hours used varies proportionately with quantity of production output. iv. City water bill, which is computed as follows First 1,000,000 gallons or less \$ 1,000 flat fee Next 10,000 gallons 0.003 per gallon used Next 10,000 gallons 0.006 per gallon used Next 10,000 gallons 0.009 per gallon used and so on and so on
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