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Question(s) / Instruction(s):

 

1.     On a day-to-day basis managers must manage the activities required to make products and services.

2.      Cost drivers are output measures of both resources and activities.

3.     Cost behavior pertains to how costs affect the activities of an organization.
     
4.     A key factor in controlling costs is associating costs with activities.
     
5.     A good example of a cost driver for production labor wages is the number of machine hours.
     
6.     A good example of a cost driver for production supervisor salaries is the number of people supervised.
     

7.      A fixed cost changes in direct proportion to changes in a cost driver.

8.      When analyzing costs, two rules of thumb are useful: (1) think of fixed costs on a per-unit basis; and (2) think of variable costs as a total.

9.      The relevant range is the limit of cost-driver activity within which a specific relationship between costs and the cost driver is valid.

10.     Costs may behave in a linear and nonlinear way.
     
11.     Only one cost driver may affect a cost at any given time.
     
12.     With very short time spans, costs become more fixed and less variable.
     

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