5. Which of the following best describes a fixed cost?A. Increase proportionately with output.B. Remains constant irrespective of the level of activity.C. Represents a fixed proportion of total costs.D. Has a direct relationship with output.6. The cost unit overhead absorption rate can only be used if the business has onestandard cost unit.A. TrueB. False7. The following statements have been made about ABC and cost drivers.(1) A cost driver is any factor that causes a change in the cost of an activity(2) For long-term variable overhead costs, the cost driver could be the volume ofactivity(3) Traditional absorption costing tends to under-allocate overhead costs to low-volume products.Which of the above statement is/are true?A. (1) and (3) onlyB. (2) and (3) onlyC. (1) and (2) onlyD. (1), (2) and (3)8. A company uses activity-based costing to calculate the unit cost of its products.The figures for Period 3 are as follows:Production set-up costs: £84,000.Total production is 40,000 units of each of products A and B, and each run is 2,000units of A or 5,000 units of B.What is the set-up cost per unit of B?A. £0.10B. £0.08C. £0.60D. £0.29

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Which of the following best describes a fixed cost? A. Increase proportionately with output. B. Remains constant irrespective of the level of activity. C. Represents a fixed proportion of total costs. D. Has a direct relationship with output.

Which of the following best describes a fixed cost? A. Increase proportionately with output. B. Remains constant irrespective of the level of activity. C. Represents a fixed proportion of total costs. D. Has a direct relationship with output.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

5. Which of the following best describes a fixed cost?
A. Increase proportionately with output.
B. Remains constant irrespective of the level of activity.
C. Represents a fixed proportion of total costs.
D. Has a direct relationship with output.
6. The cost unit overhead absorption rate can only be used if the business has one
standard cost unit.
A. True
B. False
7. The following statements have been made about ABC and cost drivers.
(1) A cost driver is any factor that causes a change in the cost of an activity
(2) For long-term variable overhead costs, the cost driver could be the volume of
activity
(3) Traditional absorption costing tends to under-allocate overhead costs to low-
volume products.
Which of the above statement is/are true?
A. (1) and (3) only
B. (2) and (3) only
C. (1) and (2) only
D. (1), (2) and (3)
8. A company uses activity-based costing to calculate the unit cost of its products.
The figures for Period 3 are as follows:
Production set-up costs: £84,000.
Total production is 40,000 units of each of products A and B, and each run is 2,000
units of A or 5,000 units of B.
What is the set-up cost per unit of B?
A. £0.10
B. £0.08
C. £0.60
D. £0.29

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