SLIDE 14: Question 1 – Cost Concepts and Cost

Behaviour
Consider the graphs that follow (the horizontal axis represents activity; the vertical
axis represents dollar amounts for the total or per unit costs).

1 2 3 4 5

6 7 8 9 10

No Relationship Some Other

Pattern

11 12 13 14 15
Required:
For items A-N that follow, choose the graph that best represents the cost behavior pattern
described. Some graphs may be used more than once and some graphs may not be used at
all.
Write your answer in the table at the end of the list.

A. Direct material costs.

B. Plant Manager’s salary.
C. Mixed costs – for example, fixed electrical power demand charge plus variable usage
rate.
D. Amortization of plant, computed on a straight-line basis.
E. Pay as you go phone voice service. The rate is a minimum fixed fee of $50 for the first
500 minutes and $0.25 per minute for the next 1000 minutes. All usage above 1500
minutes are free.
F. Incentive bonus plan that pays managers $0.10 for every unit produced above some
level of production.
G.
H. Monthly property taxes for manufacturing plant
I. Pay as you go phone voice service. The rate is $0.35 per minute for the first 100 minutes
and $0.25 per minute thereafter
J. Monthly salaries of production supervisors. One supervisor is required for every
batch of 1,000 units produced
K. Cost of wood planks used in the production of furniture
L. Sales commissions to sales persons that are paid at a rate of 10% of sales up to a
maximum of $10,000 per month
M. Compensation for sales supervisors who are paid an annual salary of $50,000
and an additional commission at 1% of sales
N. Pay as you go phone voice service. The rate is a minimum fixed fee of $20 for the first
100 minutes and $0.25 per minute thereafter