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How does assuming that operating activity occurs within a relevant range affect cost-volume-profit analysis - is this realistic? Be sure to include a discussion of cost behavior patterns and how that impacts this whole process.

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Jean Keeling
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3 Sep 2018

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1. Which one of the following refers to a cost that remains the same as the volume of activity decreases within the relevant range?

A. Average cost per unit.

B. Variable cost per unit.

C. Unit fixed cost.

D. Total variable cost.

2. The relevant range refers to the activity levels over which

A. Cost relationships hold constant.

B. Costs fluctuate.

C. Production varies.

D. Relevant costs are incurred.

3. When identifying fixed and variable costs, which one of the following is a typical assumption concerning cost behavior?

A. General and administrative costs are assumed to be variable costs.

B. Cost behavior is assumed to be realistic for all levels of activity from zero to maximum capacity.

C. Total costs are assumed to be linear when plotted on a graph.

D. The relevant time period is assumed to be 5 years.

4. A management accountant is about to prepare graphs of total variable cost and per-unit variable cost for use in a short-term planning model. Dollars will be depicted on the vertical axis; activity will be shown on the horizontal axis. How will these graphs appear under completion?

Total Variable Cost; Per-Unit Variable Cost

A. Straight line, sloping upward to the right; Straight line, parallel to the horizontal axis

B. Curvilinear, sloping upward to the right; A line that basically parallels the horizontal axis, first decreasing and then increasing

C. Straight line, sloping upward to the right; Straight line, sloping upward to the right

D. Straight line, parallel to the horizontal axis; Straight line, sloping upward to the right

5. A company has found that its total electricity cost has both a fixed component and a variable component within the relevant range. The variable component seems to vary directly with the number of units produced. Which one of the following statements concerning electricity cost is incorrect?

A. The total electricity cost will increase as production volume increases.

B. The total electricity cost per unit of production will increase as production volume increases.

C. The variable electricity cost per unit of production will remain constant as production volume increases.

D. The fixed electricity cost per unit of production will decline as production volume increases.

Cost-volume-profit (CVP)

posted Nov 28, 2016, 4:07 AM

Cost-volume-profit (CVP) analysis is a key step in manydecisions. CVP analysis involves specifying a model of therelations among the prices of products, the volume or level ofactivity, unit variable costs, total fixed costs, and the salesmix. This model is used to predict the impact on profits of changesin those parameters. Explain how changes in activity affectcontribution margin and net operating income.

Can somebody help me with my accounting project, here are theinstructions:

Complete the Critical Thinking Problem A6-74 "Cost Behavior inReal Companies"Note: You must choose a publicly traded company foryour analysis. You may not use Pearson or any other publishingcompany for this analysis.

Your essay must include a cover page, introduction, body,conclusion, and a reference page. Be sure to address all relevantparts of each question. Your response should be a minimum of 700words in length (not including the cover page and the referencepage). Cite all references you use. Note: You must use at leastthree references. Proper citation format for a reference includesthe name of the author(s), the title of the work, the date of thepublication, and the page number.

A6-74
Cost Behavior in Real Companies
Choose a company with which you are familiar that manufactures aproduct or provides a service. In this activity, you will be makingreasonable estimates of the costs and activities associated withthis company; companies do not typically publish internal cost orprocess information.

Basic Discussion Questions
1. Describe the company you selected and the products or servicesit provides.
2. List ten costs that this company would incur. Include costs froma variety of departments within the company, including humanresources, sales, accounting, production (if a manufacturer),service (if a service company), and others. Make sure that you haveat least one cost from each of the following categories: fixed,variable, and mixed.
3. Classify each of the costs you listed as either fixed, variable,or mixed. Justify why you classified each cost as you did.
4. Describe a potential cost driver for each of the variable andmixed costs you listed. Explain why each cost driver would beappropriate for its associated cost.
5. Discuss how easy or difficult it was for you to decide whethereach cost was fixed, variable, or mixed. Describe techniques acompany could use to determine whether a cost is fixed, variable,or mixed.

Thank you very much!!!

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