Matching graphs with descriptions of cost behaviour. (D. Green) On the following page are a number of charts, each indicating some relationship between cost and a cost driver. No attempt has been made to draw these charts to any particular scale; the absolute numbers on each axis may be closely or widely spaced.
Indicate by number which one of the charts best fits each of the situations or items described. Each situation or item is independent of all the others; all factors not stated are assumed to be irrelevant. $ome charts will be used more than once; some may not apply to any of the situations. Note that category 14, “No relationship,” is not the same as 15, “home other pattern.”
Ifthe horizontal axis represents the production output over the year and the vertical axis represents total cost or revenue, indicate the one best pattern or relationship for the following:
1. Direct materials costs 2. fiupervisors’ salaries 3. A breakeven chart 4. Mixed costs—for example, fixed electrical power demand charge plus variable usage rate 5. Amortization of plant, computed on a straight-line basis 6. Data supporting the use of a variable cost rate, such as manufacturing labour cost of $14 per unit produced 7. Incentive bonus plan that pays managers $0.10 for every unit produced above some level of production 8. Interest charges on money borrowed at a fixed rate ofinterest to finance the acquisition of a plant, before any payments on principal