Question

1. Matching Cost Behavior Descriptions to Cost Behavior Graphs

   Select the graph (A through L) that best matches the numbered (1 through 7) italicized descriptions of various cost behavior. For each graph, the vertical (y) axis represents total dollars of cost, and the horizontal (x) axis represents output units during the period. The graphs may be used more than once.
   

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   Required:

   1. The cost of depreciation. The asset being depreciated is a large piece of production machinery equipment where the straight-line depreciation method is used.
       letter  

   2. The cost of operating a forklift. The forklift is used to move work-in-process inventory in groups of 100 units across the factory floor.
       letter  

   3. The cost of direct materials. The first 2,000 pounds of direct materials are free because they are donated by the local city government. After that, the direct materials cost consists of a per-unit amount that decreases after a threshold of 2,500 total pounds is reached.
       letter  

   4. The cost of inspecting finished goods inventory. Each unit is inspected by a quality expert who is paid the same amount for each unit inspected.
       letter  

   5. The cost of product shipping for all output shipped in the period. The shipping cost per unit decreases with each unit shipped up to a certain number of units, at which time the shipping cost per unit remains constant.
       letter  

   6. The cost of compliance with Environmental Protection Agency (EPA) regulations. An electric car plant manufactures car batteries. Part of the manufacturing process involves the emission of toxic chemicals into the environment, which is regulated by the EPA in the form of a fee assessed on a per-unit manufactured basis. The per-unit cost of complying with these regulations increases with every fifth battery produced.
       letter  

   7. The cost of customer energy consumption. The local electric utility company uses a pricing system designed to encourage customers to conserve energy usage. Therefore, the rate per kilowatt-hour that is charged to customers increases with each hour the customer consumes.
       letter  

Answer 1

S.no	Cost Behavior Graph
1	K	Depreciation remains same at each year.
2	H	As units increases in the batch of 100 cost also increases.
3	A	Cost is 0 initially and increase till 2500 units and thereafter decreases.
4	J	Cost increases with the increase in units.
5	I	In this case, slope shows marginal increase as cost per unit after becomes constatnt.
6	E	Slope increase continuosly
7	L	Cost increases with the increase slope.