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What are the three major types of product costs in a manufacturing company? 1β2 define the following: (a) direct materials, (b) indirect materials, (c) direct labor, (d) indirect labor, and (e) manufacturing overhead. 1β3 explain the difference between a product cost and a period cost. 1β4 distinguish between (a) a variable cost, (b) a fixed cost, and (c) a mixed cost. 1β5 what effect does an increase in the activity level have onβ a. unit fixed costs? b. unit variable costs? c. total fixed costs? d. total variable costs? 1β6 define the following terms: (a) cost behavior and (b) relevant range. 1β7 what is meant by an activity base when dealing with variable costs? give several examples of activity bases. 1β8 managers often assume a strictly linear relationship between cost and the level of activity. how can this practice be defended in light of the fact that many costs are curvilinear? 1β9 distinguish between discretionary fixed costs and committed fixed costs. 1β10 does the concept of the relevant range apply to fixed costs? explain. 1β11 what is the difference between a traditional format income statement and a contribution format income statement? 1β12 what is the contribution margin? 1β13 define the following terms: differential cost, sunk cost, and opportunity cost.
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