1. Describe how total variable costs behave with changes in the level of activity.
2. Describe how unit variable costs behave with changes in the level of activity.
3. Describe how total fixed costs behave with changes in the level of activity.
4. Describe how unit fixed costs behave with changes in the level of activity.
5. How would direct materials costs be classified (fixed or variable) if units produced was the activity base? Explain.
6. How would electricity costs of $0.35 per kilowatt-hour be classified (fixed or variable) if units produced was the activity base? Explain.
7. How would factory equipment depreciation computed on the straight-line basis be classified (fixed or variable) if units produced was the activity base? Explain.
8. In applying the high-low method of cost estimation to mixed costs, how is the unit variable cost estimated?
9. In applying the high-low method of cash estimation to mixed costs, how is the total fixed cost estimated?
10. If fixed costs increase, what would be the impact on the contribution margin? Explain.
11. If fixed costs increase, what would be the impact on income from operations? Explain.
12. The ABC company has a high contribution margin ratio and production is currently at a level below maximum capacity. Suggest a likely means of improving income from operations. Explain.
13. If the unit cost of direct materials is decrease, what effect will this change have on the break-even point? Explain.
14. Both ABC Company and XYZ Company had the same unit sales, total costs, and income from operations for the current fiscal year; yet ABC Company had a lower-break-even point than XYZ Company. Explain the reason for this difference in break-even points.
15. Describe break-even point and how it is computed when stated in units.
16. Describe what is meant by the term cost behavior.
17. Define variable costs. GIve an example of a variable cost in the production of books and explain why it would be a variable cost. Be specific.
18. Define fixed costs. Give an example of a fixed cost in the product of books, and explain why it would be a fixed cost. Be specific.
19. Define what is meant by the term margin of safety, and explain how it is computed.
20. Define what is meant by relevant range and how it relates to cost-volume-profit analysis.
21. Define the term mixed costs. Provide an example of how to use mixed costs for cost-volume-profit analysis.