COST ACCOUNTING
COST BEHAVIORS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the b term represents variable cost per unit of activity
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the a term represents variable cost in total
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the X term represents total costs
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the Y term represents total fixed costs
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Detailed explanation-1: -The cost equation Y=a+bx is often used to express cost formulas. Which of the following representations in this equation is correct? The ‘b’ represents variable cost per unit of activity.
Detailed explanation-2: -Y = a + bx Y = Total cost. a = Total fixed cost (that is, a cost that does not vary in proportion to activity) b = Variable cost per unit of activity; this is a cost that does vary in proportion to activity. x = Number of units of activity.
Detailed explanation-3: -This is a standard formula for computing the total cost of producing a unit, wherein “y” will be the total cost, “a” would be the total fixed cost, “b” would be the variable cost per unit, while “x” would be the number of units.
Detailed explanation-4: -The general form of the cost function formula is C(x)=F+V(x) C ( x ) = F + V ( x ) where F is the total fixed costs, V is the variable cost, x is the number of units, and C(x) is the total production cost.
Detailed explanation-5: -The linear equation Y=a+bX is often used to express cost formulas. In this equation: The Y term is the total cost. The a term is the fixed cost per period.