Cost Behavior and Relevant Range quiz Cost Accounting Quiz On Jan 24, 2026 Share Cost Behavior and Relevant Range 10 questions in 10 minutes Pass Score 70% 1 / 10 Which one of the following categories of cost is most likely not considered a component of fixed factory overhead ? Depreciation Property taxes Rent Power 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 2 / 10 Which of the following is the best example of a variable cost ? Cost of raw material The corporate president’s salary Property taxes Interest charges Variable costs vary directly with the level of production. As production increases or decreases, material cost increases or decreases, usually in a direct relationship 3 / 10 The sum of the costs necessary to effect a one-unit increase in the activity level is a(n) : Differential cost Opportunity cost Marginal cost Incremental 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. 4 / 10 The least exact method for separating fixed and variable costs is : Computer simulation Matrix algebra The least squares method The high-low method 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 5 / 10 When identifying fixed and variable costs, which one of the following is a typical assumption concerning cost behavior ? General and administrative costs are assumed to be variable costs The relevant time period is assumed to be 5 years Cost behavior is assumed to be realistic for all levels of activity from zero to maximum capacity Total costs are assumed to be linear when plotted on a graph Total costs, being a mixture of fixed and variable costs, are assumed to be linear 6 / 10 Which one of the following refers to a cost that remains the same as the volume of activity decreases within the relevant range ? Variable cost per unit Average cost per unit Total variable cost Unit fixed cost 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 7 / 10 The difference between variable costs and fixed costs is : 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 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 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 8 / 10 Which one of the following is correct regarding a relevant range ? Total fixed costs will not change The relevant range cannot be changed after being established Actual fixed costs usually fall outside the relevant range Total variable costs will not change 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 9 / 10 Lar 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 Lar‟s electricity cost is incorrect ? The variable electricity cost per unit of production will remain constant as production volume increases The total electricity cost will increase as production volume increases The fixed electricity cost per unit of production will decline as production volume increases The total electricity cost per unit of production will increase as production volume increases Because of the fixed portion, the per-unit cost of a mixed, or semivariable, cost will decrease as production volume increases 10 / 10 The relevant range refers to the activity levels over which : Costs fluctuate Relevant costs are incurred Production varies 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 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
