Faculty of Business

Chapter Five Practice

Cost Behavior: Analysis and Use
True /False Question
1- Cost behaviour analysis is the process of determining how the total amount
spent on a specific cost item behaves/reacts in response to changes in the level of
its activity cost driver

Answer: True

2- If the cost behavior pattern is mixed, then the managers don’t need to know how
much of it is fixed and how much is variable.
Answer: False If the cost behavior pattern is mixed, and then the managers need to
know how much of it is fixed and how much is variable.

3- Understanding cost behavior patterns is central to planning, controlling, and

making decisions in the operation of organizations.

Answer: True

4- Variable costs are costs that vary, in total, in direct proportion to changes in the
level of activity.

Answer: True

5. The variable cost per unit is varying within the relevant range.

Answer: False the variable cost per unit is constant within the relevant range.

Dr. Reda Elazab – Spring 2022 Managerial Accounting Page 1

 Faculty of Business
6- Fixed costs are costs that remain unchanged in total for a given time period,
regardless of changes in the related level of activity

Answer: True

7- . The behavior of per unit cost is as the number of units produced increases, per
unit fixed cost drops at a decreasing rate

Answer: True

8- In fixed costs, the last unit absorbs the biggest impact on average unit costs

Answer: False In fixed costs; the first unit absorbs the biggest impact on average
unit costs

9. As volume of activity changes within a relevant range, variable cost per unit
remains constant and fixed cost per unit changes proportionally in the opposite
direction of the changes in the activity level.
Answer: False As volume of activity changes within a relevant range, variable cost
per unit remains constant and fixed cost per unit changes in the opposite direction
of the changes in the activity level.

10. Assume that activity level increases. If the cost per unit remained
unchanged, then we can conclude that the cost behavior is variable.
Answer: True Assume that activity level increases. If the cost per unit remained
unchanged, then we can conclude that the cost behavior is variable.

11. Assume that activity level increases. If the cost per unit decreased, then we
can conclude that the total cost is fixed.

Dr. Reda Elazab – Spring 2022 Managerial Accounting Page 2

 Faculty of Business
Answer: False Assume that activity level increases. If the cost per unit decreased,
then we can conclude that the total cost is fixed or mixed

12 as activity level changes, total variable cost changes proportionately in the same
direction, but unit variable cost remains the same.
Answer: True as activity level changes, total variable cost changes proportionately
in the same direction, but unit variable cost remains the same.

13. When labeling a cost as variable or fixed, we assume that the company is
operating within its normal range of activity
Answer: True when labeling a cost as variable or fixed, we assume that the
company is operating within its normal range of activity

(2) Choose the correct Answer:

1- The graph of.........................

A) Variable cost
B) Fixed cost
C) Mixed Cost

Dr. Reda Elazab – Spring 2022 Managerial Accounting Page 3

 Faculty of Business
2- The data of.........................

# of Units Total Fixed

Produced Costs
50 $5000
100 $5000
500 $5000
1000 $5000
A) Variable cost B) Fixed cost
C) Mixed Cost

3- The graph of.........................

A) Variable cost
B) Fixed cost
C) Mixed Cost
4- If the slope 0.2 so the cost equation is..............................
A) Y = $2,600 + $0.01X
Dr. Reda Elazab – Spring 2022 Managerial Accounting Page 4
 Faculty of Business
B) Y = $2,550 + $0.03X
C) Y = $2,500 + $0.02X
5 -Some costs may change proportionally to changes in the level of activity
A) Variable cost
B) Fixed cost
C) Mixed Cost
6- The total variable cost is..... When activity level is.......
A) Zero-Zero
B) one-one
C) two-two

7- Use the following information about Transportation cost to identify its cost
behavior pattern.
Transportation 400 units $2,400
Transportation 350 units $2,040
The cost is .....................

(A) Fixed
(B) Mixed
(C) Variable
(D) none is true

Total Cost Cost Per Unit

Transportation 400 units 2400 6.00 $
Transportation 350 units 2040 5.82 $
Analysis
Dr. Reda Elazab – Spring 2022 Managerial Accounting Page 5
 Faculty of Business
• Because the total costs at the two levels are not the same, we conclude that
the cost is not fixed.
• Because the unit costs differ at the two activity levels, the cost is not variable
• Thus, since the cost is not fixed or variable, it is a mixed cost.

8- Use the following information about XXXX cost to identify its cost behavior
pattern.
XXXX 400 units $2,400
XXXX 350 units $2,400
The cost is .....................

(A) Fixed
(B) Mixed
(C) Variable
(D) none is true

8- Use the following information about XXXX cost to identify its cost behavior
pattern.
XXXX 400 units $800
XXXX 200 units $400
The cost is.....................

(A) Fixed
(B) Mixed
(C) Variable
(D) none is true

Dr. Reda Elazab – Spring 2022 Managerial Accounting Page 6