1. Why is knowledge of cost behavior important for managerial decision making? Give an example to illustrate your answer.
2. What is a driver? Give an example of a cost and its corresponding output measure or driver.
3. Suppose a company finds that shipping cost is $3,560 each month plus $6.70 per package shipped. What is the cost formula for monthly shipping cost? Identify the independent variable, the dependent variable, the fixed cost per month, and the variable rate.
4. Some firms assign mixed costs to either the fixed or variable cost categories without using any formal methodology to separate them. Explain how this practice can be defended.