Cost Concepts Quiz

What are direct costs also known as?

• Variable costs

• Prime costs

• Overheads

• Indirect costs

Which of the following is an example of a fixed cost?

• Raw materials

• Sales commissions

• Direct labor

• Rent

What does Total Variable Cost (TVC) equal?

• Fixed Cost + Variable Cost

• Variable Cost per unit × Number of units produced

• Total Cost + Variable Cost

• Total Cost - Fixed Cost

What is the formula for calculating break-even output?

• Fixed Cost / (Selling Price per unit - Variable Cost per unit)

• Total Cost / Selling Price per unit

• Total Revenue / Total Cost

• Variable Cost / Selling Price per unit

What does marginal costing focus on?

• Overhead costs

• Variable costs of additional output

• Fixed costs

• Total costs

Which of the following is NOT a benefit of absorption costing?

• All costs are included

• It is easy to forecast fixed costs

• It ensures price is set after all costs are added

• It calculates unit cost after allocating overheads

What does contribution per unit indicate?

• How much each sale contributes to fixed costs

• Total revenue from sales

• Total costs of production

• Variable costs per unit

What happens to average total cost (ATC) as output rises?

• It increases

• It decreases

• It becomes zero

• It remains constant

Which of the following is a characteristic of variable costs?

• They remain constant regardless of output

• They change with the level of output

• They are always fixed in the long term

• They are not included in total costs

What is the primary purpose of break-even analysis?

• To calculate fixed costs

• To determine the level of output where total revenue equals total costs

• To assess market conditions

• To maximize profits