REVISION 3 : TOPIC 3, 4, 5 & 7

A variable cost remains constant per unit at various levels of activity

• True

• False

A fixed cost remains constant in total and on a per unit basis at various levels of activity.

• True

• False

If volume increases, all costs will increase

• True

• False

Changes in the level of activity will cause unit variable and unit fixed costs to change in opposite directions

• True

• False

For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity

• True

• False

The high-low method is used in classifying a mixed cost into its variable and fixed elements

• True

• False

A mixed cost has both selling and administrative cost elements

• True

• False

The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost

• True

• False

When applying the high-low method, the variable cost element of a mixed cost is calculated before the fixed cost element.

• True

• False

An assumption of CVP analysis is that all costs can be classified as either variable or fixed

• True

• False