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🎯Cost Behavior: Variable Cost, Fixed Cost, and Mixed Cost: 27 MCQs

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Option	In Total cost	Per Unit cost
A)	Increase	Decrease
B)	Increase	Increase
C)	Increase	No effect
D)	Decrease	Increase

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Kevin 4 November 2024

so apparently my answer (option C) was marked incorrect even though the answer was correct on the answer reveal.

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1. Maroun, CPA 7 November 2024
  
  Hello Kevin,
  
  There was indeed an error in the system that caused your answer to be marked incorrectly. I’ve fixed the issue, so the correct answer should now be displayed accurately in the answer reveal.
  
  Thank you for bringing this to our attention!
  
  Log in to Reply
aaron tsoi 6 January 2025

Why we don’t include fixed manuf. overhead of 3.50 to calculate incremental manuf. cost?

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1. Maroun, CPA 8 January 2025
  
  Hello Aaron,
  
  The reason fixed manufacturing overhead ($3.50) is not included in the calculation of incremental manufacturing cost is that fixed costs do not change with production levels within the relevant range. Fixed costs, such as fixed manufacturing overhead, are incurred regardless of whether the company produces 6,000 or 6,001 units, as long as production remains within the range of 4,500 to 9,000 units.
  
  Incremental costs reflect the additional costs incurred to produce one more unit, which are variable costs like direct materials, direct labor, and variable manufacturing overhead. These costs increase directly with production, whereas fixed costs remain constant and do not contribute to the cost of producing an additional unit.
  
  For example, if the total fixed manufacturing overhead is $21,000 at 6,000 units (6,000 x $3.50), it will still be $21,000 at 6,001 units. Since fixed costs do not increase with production, they are not part of the incremental manufacturing cost.
  
  I hope this helps clarify!
  
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Imran Leghari 20 June 2025

The Answer to question no 10 is not clear, since the actual productions of 5,000 units is beyond the relevant range (1,500 to 4,000 Units) so the fixed cost per unit should increase, but in the answer, It is still used 2.75$??

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1. Maroun, CPA 21 June 2025
  
  Hello Imran,
  
  There is a typo in the question. The relevant range should have been 1,500 units to 5,000 units.
  I’ve updated the question. Thank you for bringing this to our attention!
  
  Log in to Reply
Jessica 21 July 2025

I think the explanation for question 1 is incorrect? I selected answer A and it was marked correct. Answer A says total increases and per unit decreases. But the explanation says both will increase.

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1. Maroun, CPA 23 July 2025
  
  Hello Jessica,
  
  You’re correct! The original explanation provided for Question 1 contains a typo.
  On a per-unit basis, the mixed cost will decrease, since the fixed component is being spread over more units, resulting in lower fixed cost per unit. The variable component per unit stays constant, but the overall effect is still a decrease in total mixed cost per unit.
  I’ve updated the explanation. Thanks for pointing this out!
  
  Log in to Reply

	Average Cost per Unit
Total Direct materials	$4.25
Total Direct labor	$3.00
Variable manufacturing overhead	$1.50
Fixed manufacturing overhead	$2.75
Fixed selling exp.	$0.90
Fixed administrative exp.	$0.60
Commission on Sale	$0.50
Variable administrative exp.	$0.40

	Cost per Unit	Cost per Period
Total Direct materials	$9.80
Total Direct labor	$6.15
Variable manufacturing overhead	$2.65
Fixed manufacturing overhead		$151,500
Commission on Sales	$1.50
Variable administrative exp.	$1.00
Fixed selling & administrative exp.		$ 50,500

	Cost per Unit	Cost per Period
Total Direct materials	$ 8.50
Total Direct labor	$ 5.75
Variable manufacturing overhead	$ 2.25
Fixed manufacturing overhead		$ 117,500
Commission on Sale	$ 1.50
Variable administrative expenses	$ 1.10
Fixed selling and administrative expenses		$ 50,900

	Cost per Unit	Cost per Period
Direct materials	$ 8.15
Direct labor	$ 5.10
Variable manufacturing overhead	$ 2.00
Fixed manufacturing overhead		$ 135,000
Sales commissions	$ 1.75
Variable administrative expense	$ 0.90
Fixed selling and administrative expense		$ 55,500

	Average Cost per Unit
Direct materials	$ 7.50
Direct labor	$ 3.75
Variable manufacturing overhead	$ 2.20
Fixed manufacturing overhead	$ 3.50
Fixed selling expense	$ 1.50
Fixed administrative expense	$ 1.00
Sales commissions	$ 1.50
Variable administrative expense	$ 0.90

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🎯Cost Behavior: Variable Cost, Fixed Cost, and Mixed Cost: 27 MCQs

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