FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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.
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- How do costs behave when there is a change in volume?a) ______ increases or decreases in total in direct proportion to increases or decreases in sales volume. b) ______ remains the same in total, regardless of change in sales. c) ______ have both a variable and fixed component. d) Answer the following regarding the high-low method:i) What is the formula for determining the variable costs when using the high low method:ii) Given the following information for the high and low levels, what is the variable cost per unit and the total fixed costs? iii) Based on the information in part ii), what is the relevant range?In MyAccountingLab, complete Try It! 21-1 and S21-1 through S21-3.LO2. What is contribution margin, and how is it used to compute operating income?a) What is the contribution margin if net sales revenue is $100,000 and variable costs are $40,000? b) Based on the information in part a), what is the contribution margin ratio?In MyAccountingLab, complete Try It! 21-2 and S21-4 and…arrow_forwardIn order to have differential costs, only variable costs are allowed. Do you think so? Explain.arrow_forwardFixed costs will often be irrelevant for short-term decision making because they: Do not vary on a per-unit-of-output basis. O Are the same each time period. Typically do not differ in total between decision alternatives being considered. O Are not committed. Cannot be estimated with precision.arrow_forward
- In incremental analysis, only relevant costs are considered when making a decision among alternatives. Explain what relevant costs are. Would these include only variable costs? Explain.arrow_forwardWhich of the following statements is true of ABC systems? A) ABC systems are time-driven cost systems. B) ABC systems classify some direct costs as indirect costs and some indirect costs as direct costs. C) ABC systems provide valuable information to managers beyond accurate product costs. D) ABC systems assume all costs are variable costs.arrow_forwardHaving an issue with this problem. Thank youarrow_forward
- Match each definition (See picture) with related terms below: -Capacity -Common Fixed Costs -Complementary Products -Constrained Resources -Direct Fixed Cost -Idle Capacity -Incremental Analysis -Segment Margin -Substitute Products -None of these are correctarrow_forwardThe simplifying assumption that costs and volume vary in straight-line relationships makes the analysis of cost behav-ior much easier. What factors make this a reasonable and useful assumption in many cases?arrow_forwardPLEASE ANSWER ALL Write “True” if the statement is true and write “False” if the statement is false. If volume increases, both total variables and total fixed costs will increase. Decrease in the level of activity will cause total variable and total fixed costs to decrease. When graphed, total variable costs and total fixed costs are both assumed to be linear withinthe relevant range.arrow_forward
- When the level of activity decreases, variable cost will increase or decrease ?arrow_forwardWhat happens to the total variable costs and the total fixed costs when the level of activity increases or decreases? How about the unit variable cost and the unit fixed cost?arrow_forward(Variable cost = Total cost - Fixed cost - Net profit) you have not consider the net profit in the calculation. I think it should be added right ?arrow_forward
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