Chapter 2: Cost Terms, Concepts and Classifications

Chapter 2: Cost Terms, Concepts and Classifications

Name: Melda George
User ID: 218444
Date: 13/09/2015
Answer to Question 2-4:
a. Variable cost: The variable cost is constant per unit, whereas Total Variable Cost changes in direct proportion to changes in volume.

b. Fixed cost: Fixed cost remains constant even if there are changes in the level of activity with relevant range. The Average Fixed Cost varies inversely with changes in volume per unit.

c. Mixed cost: A mixed cost contains both variable and fixed cost elements.
Answer to Question 2-5:
a. Fixed costs decrease as volume increases.
b. Variable costs remains constant as volume increases.
c. Total fixed costs remains constant as volume increases.
d. Total variable costs increase as volume increases.
Answer to Question 2-6:
a. Cost behavior: The way in which a cost reacts or responds to changes in the level of business activity

b. Relevant range: The range of activity within which assumptions about variable and fixed cost behavior are valid.
Answer to Exercise 2-1:
1. Direct labor cost
2. Selling cost
3. Direct materials cost
4. Manufacturing overhead cost
5. Combination: Administrative cost, selling cost and manufacturing overhead cost.
6. Administrative cost
7. Selling cost
8. Manufacturing overhead cost

Answer to Exercise 2-2:
1. Product (Inventoriable) cost
2. Product (Inventoriable) cost
3. Product (Inventoriable) cost
4. Period (Noninventoriable) cost
5. Product (Inventoriable) cost
6. Period (Noninventoriable) cost
7. Product (Inventoriable) cost
8. Period (Noninventoriable) cost
9. Period (Noninventoriable) cost
10. Product (Inventoriable) cost
11. Product (Inventoriable) cost
12. Period (Noninventoriable) cost
13. Product (Inventoriable) cost
14. Period (Noninventoriable) cost
15. Product (Inventoriable) cost

Answer to Exercise 2-5:

Answer to Exercise 2-6:
No. Cost Cost Object Direct
Cost Indirect
1. The salary of head chef The Hotel’s...

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