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Finance (600) Chapter 21-Cost Behavior

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Sandra Watson
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Chapter 21–Cost Behavior and Cost-Volume-Profit Analysis

1. Cost behavior refers to the methods used to estimate costs for use in managerial decision making.

2. Cost behavior refers to the manner in which a cost changes as the related activity changes.

3. The fixed cost per unit varies with changes in the level of activity.

4. A production supervisor’s salary that does not vary with the number of units produced is an example of a
fixed cost.

5. Direct materials cost that varies with the number of units produced is an example of a fixed cost of
production.

6. In order to choose the proper activity base for a cost, managerial accountants must be familiar with the
operations of the entity.

7. The relevant range is useful for analyzing cost behavior for management decision-making purposes.

8. The relevant activity base for a cost depends upon which base is most closely associated with the cost and the
decision-making needs of management.

9. The range of activity over which changes in cost are of interest to management is called the relevant range.

10. Total fixed costs change as the level of activity changes.

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Finance (600) Chapter 21-Cost Behavior

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