1. Why is knowledge of cost behavior important for managerial decision making? Give an example to illustrate your answer.
2. How does the length of the time horizon affect the classification of a cost as fixed or variable? What is the meaning of short run? Long run?
3. Explain the difference between resource spending and resource usage.
4. What is the relationship between flexible resources and cost behavior?
5. What is the relationship between committed resources and cost behavior?
6. Explain the difference between committed and discretionary fixed costs. Give examples of each.
7. Describe the difference between a variable cost and a step cost with narrow steps. When is it rea- sonable to treat these step costs as if they were variable costs?
8. What is the difference between a step cost with narrow steps and a step cost with wide steps?
9. What is an activity rate?
10. Why do mixed costs pose a problem when it comes to classifying costs into fixed and variable categories?