Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 11, Problem 13Q
To determine
The reason for the terminology appears to be contradictory.
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Question 1:Verna Salsbury tells you that she thinks the terms fixed cost and variable cost are confusing. She notes that fixed cost per unit changes when the number of units changes. Furthermore, variable cost per unit remains fixed regardless of how many units are produced. She concludes that the terminology seems to be backward. Explain why her explanation appears to be incorrect.
Please explain thoroughly the statement below. (True/false), how and why?
"When expressed on a per-unit basis, fixed costs can mislead decision-makers into thinking of them as variable costs."
Here is my explanation on the statement above (is it true?): Because the fixed cost per unit varies and variable cost per unit is constant. Therefore, users can think of the fixed cost as a variable cost.
1. What is the difference between variable and fixed costs?
Also explain how the total variable cost and total fixed cost is affected by increasing the number of units produced? What happens to the total variable cost per unit and total fixed cost per unit?
3. What is a mixed cost?
2. The high-low method of analyzing mixed costs uses only two observation points: the high and low points of activity. Are these always the best points for prediction purposes? Why or why not?
Chapter 11 Solutions
Survey Of Accounting
Ch. 11 - 1.Define fixed cost and variable cost and give an...Ch. 11 - Prob. 2QCh. 11 - 3.Define the term operating leverage and explain...Ch. 11 - Prob. 4QCh. 11 - Prob. 5QCh. 11 - 6.If volume is increasing, would a company benefit...Ch. 11 - Explain the risk and rewards to a company that...Ch. 11 - 9.Are companies with predominately fixed cost...Ch. 11 - 10.How is the relevant range of activity related...Ch. 11 - Which cost structure has the greater risk?...
Ch. 11 - 14.The president of Bright Corporation tells you...Ch. 11 - Prob. 12QCh. 11 - Prob. 13QCh. 11 - Prob. 14QCh. 11 - Prob. 15QCh. 11 - Prob. 16QCh. 11 - Prob. 17QCh. 11 - Prob. 1ECh. 11 - Prob. 2ECh. 11 - Prob. 3ECh. 11 - Exercise 2-4A Determining total variable cost The...Ch. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Prob. 7ECh. 11 - Prob. 8ECh. 11 - Prob. 9ECh. 11 - Prob. 10ECh. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Prepare an income statement using the contribution...Ch. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Prob. 17ECh. 11 - Prob. 18ECh. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Problem 2-19A Context-sensitive nature of cost...Ch. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Prob. 26PCh. 11 - Prob. 27PCh. 11 - Prob. 28PCh. 11 - Prob. 29PCh. 11 - Prob. 1ATCCh. 11 - Prob. 2ATCCh. 11 - Prob. 3ATCCh. 11 - Prob. 4ATCCh. 11 - Prob. 5ATC
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- Which of the followings is not correct about cost-based pricing? Select one: a. Total fixed costs change as the production amount changes. b. Total costs are the sum of total fixed and variable costs. c. Total variable costs increase due to a rise in production level. d. Variable costs per unit tend to be constant with respect to number of units produced.arrow_forwardWhich one of the following statement is not correct? O Both fixed and variable costs influence short-term decision-making. O Short-term decision-making is all about analysing those costs that will change as a result of taking a particular action. O Opportunity costs are only considered when resources are limited. O Break-even analysis is used to determine how many units of a product or a service a business has to sell to cover all its costs.arrow_forwardSelect the correct statement regarding fixed costs. A) Because they do not change, fixed costs should be ignored in decision making.B) The fixed cost per unit decreases when volume increases. C) The fixed cost per unit increases when volume increases.D) The fixed cost per unit does not change when volume decreasesarrow_forward
- Select the correct statement regarding fixed costs. They do not change, because fixed costs should be ignored in decision making. The fixed cost per unit increases when volume increases. The fixed cost per unit decreases when volume increases. The fixed cost per unit does not change when volume decreases.arrow_forwardWhich of the following statements about margin of safety is false? O a. If only the fixed costs decrease but the number of units sold and unit selling price and unit variable cost are all constant, the margin of safety increases. Ob. If the variable cost per unit decreases but the number of units sold, unit selling price and total fixed cost are all constant, the margin of safety decreases. O c. If only the fixed costs increase but the number of units sold and unit selling price and unit variable cost are all constant, the margin of safety decreases. O d. none of the given answers is false. O e. Margin of safety measures the difference between budgeted revenues and breakeven revenues. OUS PAGE NEXT PAGE F9 F10 F4 F5 F7 F3 F1 & @ 23 7 8 A 1 2 4 W E T Y K S DEF 1G yH ĭ J 1. C { V BYN í Marrow_forward1. Fill in the missing numbers in the table. Use the following questions to help fill in the missing numbers in the table: a. What is the total contribution margin? b. What is the total variable expense? c. How many units were sold? d. What is the per-unit variable expense? e. What is the per-unit contribution margin? 2. Answer the following questions about breakeven analysis: a. What is the breakeven point in units? b. What is the breakeven point in sales dollars? 3. Answer the following questions about target profit analysis and safety margin: a. How many units must the company sell in order to earn a profit of $48,000? b. What is the current margin of safety in units? c. What is the margin of safety in sales dollars? d. What is the margin of safety in percentage?arrow_forward
- 17. "Within the relevant range, if there is a change in the level of the cost driver, then:" fixed costs per unit will change and variable costs per unit will remain the same fixed costs per unit will remain the same and variable costs per unit will change fixed and variable costs per unit will remain the same fixed and variable costs per unit will changearrow_forwardWhich of the following assumptions of the CVP graph is not true? Multiple Choice Costs are linear. Total fixed expenses are constant within the relevant range. Variable costs go down as volume goes up. The selling prices do not change. Volume is the only factor affecting total cost.arrow_forwardWhich of the following is not a true statement about variable costs? a. Total cost is known to change in proportion to any changes in related level of volume or activity. O b. When considering total cost behaviour, focus on fixed and variable costs. O c. A total cost that can change in proportion to changes in the number of products produced. O d. Total cost never changes in proportion to any changes in related levels of volume or activity. O e. An important cost to identify so managers can make important management decisions.arrow_forward
- Which of the following is true of fixed and variable costs? Volume changes will not change the relationship between fixed and variable costs. Fixed costs are fixed in total, but vary per unit; variable costs vary in total, but are fixed per unit. As sales increase, the contribution margin percentage increases. O The relationship between sales, variable costs, and the contribution margin does not change when the sales price per unit changes. The contribution margin is what remains after fixed costs have been subtracted from total sales.arrow_forwardWhich one of the following is not an assumption of CVP analysis? The behavior of costs and revenues are linear within the relevant range. Sales mix remains constant. All units produced are sold. All costs are variable costs.arrow_forwardWhich one of the following statement is not correct? Group of answer choices -Opportunity costs are only considered when resources are limited. -Break-even analysis is used to determine how many units of a product or a service a business has to sell to cover all its costs. -Both fixed and variable costs influence short-term decision-making. -Short-term decision-making is all about analysing those costs that will change as a result of taking a particular action.arrow_forward
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Relevant Costing Explained; Author: Kaplan UK;https://www.youtube.com/watch?v=hnsh3hlJAkI;License: Standard Youtube License