1 Identify some examples of variable costs for a manufacturing company.

2 What effect does a decrease in volume have on

a. Unit fixed costs?
b. Unit variable costs?
c. Total fixed costs?
d. Total variable costs?

3 Define the following terms: (a) cost behaviour and (b) relevant range.

4 What are curvilinear costs? What are some examples of costs that might behave in a curvilinear fashion?

5 Define a step-variable cost and give an example.

6 Managers often assume a strictly linear relationship between cost and volume. How can this practice be defended in light of the fact that many costs are curvilinear?

7 Is advertising a discretionary fixed cost or a committed fixed cost? Explain.

8 Classify the following fixed costs as normally being either committed or discretionary:

a. Insurance on buildings.
b. Advertising.
c. Travel.
d. Long-term equipment leases.
e. Pension payments to a company's retirees.
f. Training.

9 Does the concept of the relevant range apply to fixed costs? Explain.
10 What is the engineering approach to cost analysis? In what situations might this ap- proach be used?

11 What is the purpose of preparing a scattergram?

12 Why does the high-low method use the high-low activity levels instead of the high-low cost levels?

13 Give the general formula for a mixed cost. Which term represents the variable cost?

The fixed cost?

14 How is the contribution margin calculated?