Question

I. Multiple choice questions- (Give the most correct answer for the statement from the choices)

1. Which of the following is most likely to be a variable cost?

                a. Depreciation

                b. The cost of material used in production.

                c. Rent

                d. Advertising

2. Which of the following is most likely to be a fixed cost?

                a. Royalty paid on the basis of production.

                b. Rent

                c. Wages paid to assembly workers

                d. Commission.

3. Costs incurred in the past are:

                a. Opportunity costs.

                b. Direct costs.

                c. Sunk costs.

                d. Variable costs.

4. The Salary a student forgoes while in college is an example of:

                a. Opportunity cost.

                b. Direct cost

                c. Sunk cost

                d. Prime cost

5. When production decreases from 1000 to 999 units the cost decreased from $ 51,000 to $50,000; then the decrease of $1,000 is:

                a. Incremental cost

                b. Marginal cost

                c. Average cost

                d. Indirect cost

Answer 1

Solution 1:

The cost of material used in production is most likely to be a variable cost.

Hence option b is correct.

Solution 2:

Rent is most likely to be a fixed cost.

Hence option b is correct.

Solution 3:

Costs incurred in the past are "Sunk Costs"

Hence option c is correct.

Solution 4:

The Salary a student forgoes while in college is an example of "Opportunity cost."

Hence option a is correct.

Solution 5:

When production decreases from 1000 to 999 units the cost decreased from $ 51,000 to $50,000; then the decrease of $1,000 is "Marginal cost"

Hence option b is correct.