Cost Behavior and Relevant Range quiz Cost Accounting Quiz On Mar 26, 2026 Share Cost Behavior and Relevant Range 10 questions in 10 minutes Pass Score 70% 1 / 10 When identifying fixed and variable costs, which one of the following is a typical assumption concerning cost behavior ? Cost behavior is assumed to be realistic for all levels of activity from zero to maximum capacity The relevant time period is assumed to be 5 years Total costs are assumed to be linear when plotted on a graph General and administrative costs are assumed to be variable costs Total costs, being a mixture of fixed and variable costs, are assumed to be linear 2 / 10 Which one of the following is correct regarding a relevant range ? The relevant range cannot be changed after being established Total variable costs will not change Total fixed costs will not change Actual fixed costs usually fall outside the relevant range The relevant range is the range of activity over which unit variable costs and total fixed costs are constant. The incremental cost of one additional unit of production will be equal to the variable cost 3 / 10 An assembly plant accumulates its variable and fixed manufacturing overhead costs in a single cost pool, which is then applied to work in process using a single application base. The assembly plant management wants to estimate the magnitude of the total manufacturing overhead costs for different volume levels of the application activity base using a flexible budget formula. If there is an increase in the application activity base that is within the relevant range of activity for the assembly plant, which one of the following relationships regarding variable and fixed costs is true? The variable cost per unit is constant, and the total fixed costs increase The variable cost per unit increases, and the total fixed costs remain constant The variable cost per unit is constant, and the total fixed costs decrease The variable cost per unit and the total fixed costs remain constant Total variable cost changes when changes in the activity level occur within the relevant range. The cost per unit for a variable cost is constant for all activity levels within the relevant range. Thus, if the activity volume increases within the relevant range, total variable costs will increase. A fixed cost does not change when volume changes occur in the activity level within the relevant range. If the activity volume increases within the relevant range, total fixed costs will remain unchanged 4 / 10 The sum of the costs necessary to effect a one-unit increase in the activity level is a(n) : Differential cost Incremental cost Marginal cost Opportunity cost A marginal cost is the sum of the costs necessary to effect a one-unit increase in the activity level. Differential (or incremental) cost is the difference in total cost between two decisions. Opportunity cost is the maximum benefit forgone by using a scarce resource for a given purpose. It is the benefit, for example, the contribution to income, provided by the best alternative use of that resource. 5 / 10 Which one of the following refers to a cost that remains the same as the volume of activity decreases within the relevant range ? Total variable cost Variable cost per unit Unit fixed cost Average cost per unit Variable cost per unit remains constant in the short run regardless of the level of production. This is in contrast with variable costs in total, which vary directly and proportionally with changes in volume 6 / 10 Which one of the following categories of cost is most likely not considered a component of fixed factory overhead ? Depreciation Property taxes Power Rent A fixed cost is one that remains unchanged within the relevant range for a given period despite fluctuations in activity. Such items as rent, property taxes, depreciation, and supervisory salaries are normally fixed costs because they do not vary with changes in production. Power costs, however, are at least partially variable because they increase as usage increases 7 / 10 The least exact method for separating fixed and variable costs is : The high-low method The least squares method Matrix algebra Computer simulation The fixed and variable portions of mixed costs may be estimated by identifying the highest and the lowest costs within the relevant range. The difference in cost divided by the difference in activity is the variable rate. Once the variable rate is found, the fixed portion is determinable. The high-low method is a simple approximation of the mixed cost formula. The costs of using more sophisticated methods sometimes outweigh the incremental accuracy achieved. In these cases, the high-low method is sufficient 8 / 10 The difference between variable costs and fixed costs is : Variable costs per unit are fixed over the relevant range and fixed costs per unit are variable Variable costs per unit change in varying increments, while fixed costs per unit change in equal increments Total variable costs are variable over the relevant range and fixed in the long term, while fixed costs never change Variable costs per unit fluctuate and fixed costs per unit remain constant Fixed costs remain unchanged within the relevant range for a given period despite fluctuations in activity, but per unit fixed costs do change as the level of activity changes. Thus, fixed costs are fixed in total but vary per unit as activity changes. Total variable costs vary directly with activity. They are fixed per unit, but vary in total 9 / 10 The relevant range refers to the activity levels over which : Costs fluctuate Production varies Relevant costs are incurred Cost relationships hold constant The relevant range defines the limits within which per-unit variable costs remain constant and fixed costs are not changeable. It is synonymous with the short run. The relevant range is established by the efficiency of a company‟s current manufacturing plant, its agreements with labor unions and suppliers, etc 10 / 10 Which of the following is the best example of a variable cost ? Cost of raw material Interest charges Property taxes The corporate president’s salary Variable costs vary directly with the level of production. As production increases or decreases, material cost increases or decreases, usually in a direct relationship Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback a cost remains unchanged when the volume of activity changes within the relevant range.a statistical method for identifying cost behavior is calleda statistical method for identifying cost behavior is the
