The graphs below represent approximations of cost behavior patterns. The horizon

Question

The graphs below represent approximations of cost behavior patterns. The horizontal axis of each graph represents units and the vertical axis represents dollars of total cost.

Select the graph that best matches each of the situations described below. Each graph may be selected more than once.

(Select the appropriate graph by using the drop-down answer box found at the end of each situation.)

a. Straight-line depreciation of a factory building. AnswerABCDEFGH

b. Utility bill for electricity that includes a fixed charge per month plus a constant usage rate per hour for hours in excess of 100 AnswerABCDEFGH

c. Cost of microchip incorporated into a product. AnswerABCDEFGH

d. Labor cost of machine operators who become more productive as they gain experience. AnswerABCDEFGH

Explanation / Answer

a. Straight-line depreciation of a factory building will remain constant that is neither increase nor decrease. Therefore, Graph E.

b. Utility bill for electricity that includes both a fixed charge per month till 100 hours and then variable charge based on usage will remain constant till 100 hours and then increase with each hour of usage. Therefore, Graph H.

c. Cost of microchip incorporated into a product is a variable cost and will increase with the number of units produced. Therefore, Graph F.

d. Labor cost of machine operators who become more productive as they gain experience will first increase and then start reducing gradually on a per unit basis. Therefore, Graph B.

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