Matching graphs with descriptions of cost and revenue behavior
(D. Green, adapted) Given here are a number of graphs.
The horizontal axis of each graph represents the units produced over the year, and the vertical axis represents total cost or revenues.
Required:
Indicate by number which graph best fits the situation or item described (a–h). Some graphs may be used more than once; some may not apply to any of the situations.
a. Direct material costs
b. Supervisors' salaries for one shift and two shifts
c. A cost-volume-profit graph
d. Mixed costs—for example, car rental fixed charge plus a rate per mile driven
e. Depreciation of plant, computed on a straight-line basis
f. Data supporting the use of a variable-cost rate, such as manufacturing labor cost of $14 per unit produced
g. Incentive bonus plan that pays managers $0.10 for every unit produced above some level of production
h. Interest expense on $2 million borrowed at a fixed rate of interest
a. (1)
b. (6) A step-cost function.
c. (9)
d. (2)
e. (8)
f. (10) It is data plotted on a scatter diagram, showing a linear variable cost function with constant variance of residuals. The constant variance of residuals implies that there is a uniform dispersion of the data points about the regression line.
g. (3)
h. (8)
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