Additional Study Questions Cost Behavior 1) For the graphs below, the vertical axes represent total dollars of cost, and the horizontal axes represent production output during a calendar year. In each case, the zero point of dollars and production is at the intersection of the two axes Indicate by letter which of the graphs best shows the cost behavior of the situations/items described in the table on the next page (the graphs may be used as answers more than once) B C A E F G I J K L Graph Which Best Shows Cost Behavior Annual depreciation of equipment, where the amount is computed by the straight-line method. i. Annual depreciation of equipment, where the amount of depreciation charged is computed by the machine-hours method Electricity bills are a flat fixed charge, plus a variable cost after a certain number of kilowatt-hours are used, where the quantity of kilowatt-hours used varies proportionately with quantity of production output iv City water bill, which is computed as follows S1,000 flat fee 0.003 per gallon used 0.006 per gallon used 0.009 per gallon used and so on First 1,000,000 gallons or less Next 10,000 gallons Next 10,000 gallons Next 10,000 gallons and so on The gallons of water used vary proportionately with the quantity of production output Cost of lubricant for machines where cost per unit decreases with each pound of lubricant used (for example, if 1 pound is used, the cost of $ 10; if 2 pounds are used, the cost is $29.94) with a minimum cost per pound of $9.20 V used, the cost is $19.98; if 3 pounds are manufacturing plant donated by the city, where the agreement calls for a fixed fee payment unless 200,000 labor- worked, in which case no rent need be paid. vi Rent on a hours are vii Salaries of repair personnel, where one person is needed for every 1,000 machine-hours or less (that is, 0 to 1,000 hours requires one person, 1,001 to 2,000 hours requires two people, and so forth) Cost of direct materials used (assume no quantity discounts) viii ix Rent on a manufacturing plant donated by the county, where the agreement calls for rent of $100,000 reduced by $1 for each direct manufacturing labor-hour worked in excess of 200,000 hours, but minimum rental payment of $20,000 must be paid