ACTG 2P12 Chapter Notes - Chapter 4: Fixed Cost, Variable Cost

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violetmacaw957

13 Mar 2017

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Document Summary

The study of how specific costs respond to changes in the level of business activity. Identifies the activity that causes changes in the behavior of costs: direct labour hours, sales dollars, and units of output. Variable costs: costs that vary in total directly and proportionately with changes in the activity level. May also be defined as a cost that remains the same per unit at every entry level of activity: direct materials and direct labour for a manufacturer; costs of goods sold, sales commission. Rare to see a perfectly horizontal line (curved ~/") Fixed costs: costs that remain the same in total regardless of changes in the activity level. Fixed costs per unit vary inversely with activity (as volume increases, unit costs declines and vice versa: property taxes, insurance, rent, supervisory salaries, depreciation. Rare to see a perfectly horizontal line (broken _-) The range over which a company expects to operate during the year.

Related Questions

Match the items in the two columns below by entering theappropriate code letter in the space provided.

The amount of revenue remaining after deducting variablecosts.
Costs that contain both a variable and a fixed element.
The percentage of sales dollars available to cover fixed costsand produce income.
Identifies the activity which causes changes in the behavior ofcosts.
The difference between actual or expected sales and sales atthe break-even point.
Costs that vary in total directly and proportionately withchanges in the activity level.
The level of activity at which total revenues equal totalcosts.
The range over which the company expects to operate during theyear.
Costs that remain the same in total regardless of changes inthe activity level.
A costing approach in which all manufacturing costs are chargedto the product.
A method that uses the total costs incurred at the high and lowlevels of activity.
A costing approach in which only variable manufacturing costsare product costs and fixed manufacturing costs are period costs(expenses).

1.	Activity index
2.	Variable costs
3.	Fixed costs
4.	High-low method
5.	Relevant range
6.	Mixed costs
7.	Break-even point
8.	Contribution margin
9.	Variable costing
10.	Absorption costing

orangetermite875

Match the items in the two columns below by entering theappropriate code letter in the space provided.

The amount of revenue remaining after deducting variablecosts.
Costs that contain both a variable and a fixed element.
The percentage of sales dollars available to cover fixed costsand produce income.
Identifies the activity which causes changes in the behavior ofcosts.
The difference between actual or expected sales and sales atthe break-even point.
Costs that vary in total directly and proportionately withchanges in the activity level.
The level of activity at which total revenues equal totalcosts.
The range over which the company expects to operate during theyear.
Costs that remain the same in total regardless of changes inthe activity level.
A costing approach in which all manufacturing costs are chargedto the product.
A method that uses the total costs incurred at the high and lowlevels of activity.
A costing approach in which only variable manufacturing costsare product costs and fixed manufacturing costs are period costs(expenses).

1.	Activity index
2.	Variable costs
3.	Fixed costs
4.	High-low method
5.	Relevant range
6.	Mixed costs
7.	Break-even point
8.	Contribution margin
9.	Margin of safety
10.	Contribution margin ratio
11.	Variable costing
12.	Absorption costing

lavenderjackal968

If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:

a. increase.

b. remain the same.

c. decrease.

d. increase or decrease, depending upon the percentage increase in wage rates.

Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are:

a. 53% and $7 per unit.

b. 47% and $11 per unit.

c. 52% and $11 per unit.

d. 47% and $8 per unit.

If sales are $500,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?

a. 0

b. 1.3

c. 3.1

d. 1.25

Which of the following describes the behavior of the fixed cost per unit?

a. Increases with increasing production

b. Remains constant with changes in production