Concept explainers
(Learning Objective 1) A graph of a variable cost starts at
- a. any point on the y-axis and is horizontal.
- b. any point on the y-axis and slopes upward.
- c. the origin and slopes upward.
- d. the origin and is horizontal.
To identify: The appropriate answer to the given statement.
Answer to Problem 1QC
The graph of a variable cost starts at the origin and slopes upward.
Explanation of Solution
Variable cost is the cost which incurs for every unit of volume produced. Total variable cost change according to the change in volume. Total variable cost is directly proportioned to the changes in volume.
a.
Any point on the y-axis and is horizontal: This option is incorrect because the Fixed cost is the cost that does not change with the change in output level. The graph which starts with any point on the y-axis and is flat or horizontal is the graph which represents the fixed cost.
b.
Any point on the y-axis and slopes upward: This is not the correct option total cost is the cost which comprises of the sum of fixed cost and variable cost. The graph of fixed cost starts with the y-axis and is constant and the graph of variable cost starts with the origin and slopes upward. So, the graph of the total cost starts with any point on the y-axis and the slope of the total cost is downward sloping.
c.
The origin and slopes upward: The option is incorrect as the graph that starts with the origin and slopes upward is the graph of variable cost. Variable cost is the cost that changes with the change in the level of output.
d.
The origin and is horizontal: This is not the correct option because the graph that starts with the origin and is horizontal shows zero value and lie on the x-axis and it shows the production level or the production line on the graph.
Want to see more full solutions like this?
Chapter 6 Solutions
MANAGERIAL ACCT (LL) W/ ACCESS CODE >C
- If an 80% learning curve is applicable, NUBD’s total cost on this order would be estimated at A. P26,400 B. P37,950 C. P31,790 D. P38,500 E. P27,600arrow_forwardDistinguish between (a) cost behavior and (b) a mixed cost, and (c) a step-variable cost. Plot the three costs on a graph, with activity plotted horizontally and cost plotted vertically.arrow_forwardExamine the graphs in Exercise 3-40. Required: As explained in the chapter, cost behavior patterns can be described as fixed, variable, semi-variable, mixed, or step function (i.e., semi-fixed) in nature. Explain the exact type of cost behavior pattern represented by each of the cost curves shown in graphs A through L. Note that some of the graphs might represent a combination of multiple cost behavior patterns.arrow_forward
- Suppose that your accounting textbook is the cost object of concern. The paper used to print the textbook is a(n) a. fixed cost.b. labor cost.c. direct cost.d. indirect cost.e. period cost.arrow_forwardThe following if-then statements were taken from a Balanced Scorecard: a. If employee capabilities increase, then process time decreases. b. If process time decreases, then customer retention will increase. c. If customer retention increases, then market share will increase. d. If market share increases, then revenues will increase. Required: 1. Identify the lead and lag variables, and explain your reasoning. 2. Discuss the implications of Requirement 1 for the financial and learning and growth perspectives. 3. Using the first if-then statement, explain the concept of double-loop feedback.arrow_forwardIf an 80% learning curve is applicable, NUBD’s total cost on this order would be estimated atarrow_forward
- Distinguish between ( a ) a variable cost, ( b ) a mixed cost, and ( c ) a step-variable cost. Plot thethree costs on a graph, with activity plotted horizontally and cost plotted verticallyarrow_forwardHow do companies figure out past costs and the learning phenomenon that applies to them or if they will need to up the costs compared to the last product?arrow_forwardAssume you are the manager responsible for implementing a new service. The time to perform the service is subject to the learning curve. Would you prefer that the new service have a learning rate of 85 percent or 80 percent? Why?arrow_forward
- Indicate whether the item below is used as key performance indicators for the areas of (A) Financial, (B) Customer, (C) Internal Process, or (D) Learning and Growth performance. Choose the one best choice. Quantity variance on a cost report *(A) Financial(B) Customer(C) Internal Process(D) Learning and Growth performance.arrow_forwardIn the blank next to the following terms, place the letter A through D corresponding to the best description of that term. 1. Activity 2. Activity driver 3. Cost pool 4. Cost object A. Measurement associated with an activity. B. A group of costs that have the same activity drivers. C. Anything to which costs will be assigned. D. A task that causes a cost to be incurred.arrow_forwardExplain the meaning of the learning curve. How do managers determine the appropriate learning curve percentage to use?arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning