When the level of activity increases within the relevant range What is the effect on the fixed cost per unit?
If the level of activity increases within the relevant range then the fixed cost per unit will decrease. If the level of activity increases within the relevant range then the total cost per unit will increase.
When the activity level is expected to increase within the relevant range What effects would be anticipated with respect to each of the following?
Answer: b) Fixed costs per unit decrease and variable costs in total increase.
What will result from an increase in the activity level within the relevant range quizlet?
An increase in the activity level within the relevant range results in: a decrease in fixed cost per unit. The linear equation Y = a + bX is often used to express cost formulas.
What does within the relevant range mean?
The relevant range refers to a specific activity level that is bounded by a minimum and maximum amount. Within the designated boundaries, certain revenue or expense levels can be expected to occur. Outside of that relevant range, revenues and expenses will likely differ from the expected amount.
What happens if the activity level changes?
What happens when activity level increases? total variable cost increases AND variable cost per unit remains constant.
When the level of activity increases total variable costs will?
If the level of activity increases within the relevant range: variable cost per unit and total fixed costs also increase. fixed cost per unit and total variable cost also increase. total cost will increase and fixed cost per unit will decrease.
When the activity level is expected to decline within the relevant range What effects would be anticipated?
When the activity level is expected to decline within the relevant range, the fixed costs per unit would be expected to increase while variable costs…
What effect does an increase in the activity level have on average fixed costs per unit variable costs per unit Total fixed costs Total variable costs?
As the level of activity increases, the fixed cost per unit decreases. The total fixed cost remains the same. Examples of fixed costs include rent, depreciation, patent amortization, property insurance, property taxes, and fixed salaries of production executives and indirect labor.
What effect does an increase in the activity level have on total variable costs?
What happens when activity level increases? total variable cost increases AND variable cost per unit remains constant.
What is the relevant range quizlet?
The relevant range is the range of activity over which a company expects to operate during the year.
What does relevant range of activity mean?
The relevant range is the range of activity (e.g., production or sales) over which these relationships are valid. For example, if the factory is operating at capacity, increasing production requires additional investment in fixed costs to expand the facility or to lease or build another factory.
What happens to fixed costs if the activity level goes outside the relevant range?
Cost behavior often changes outside of the relevant range of activity due to a change in the fixed costs. When volume increases to a certain point, more fixed costs will have to be added. When volume shrinks significantly, some fixed costs could be eliminated.
What happens to total variable cost as the activity level increases decreases?
Variable costs: A variable cost increases or decreases as volume of activity increases or decreases. On a per unit basis, a variable cost per unit remains constant but the total amount of variable cost changes with the level of production.
When the level of activity increases total variable cost will increase True False?
36 Cards in this Set
| An activity index identifies the activity that has a causal relationship with a particular cost. | True |
|---|---|
| If volume increases, all costs will increase. | False |
| If the activity index decreases, total variable costs will decrease proportionately. | True |
When the level of activity decreases variable costs will?
decrease in total. Explanation: Variable costs vary with volume and is normally a price per unit sold.
When the activity level is expected to decline within the relevant range What effects would be anticipated with respect to fixed costs per unit?
11 Cards in this Set
| A variable cost is a cost that remains constant in total throught wide ranges of activity. ToF | False |
|---|---|
| When the activity level in expected to decline within the relevant range, what effects would be anticipated with respect to each of the following | Fixed incrase; variable not change |
Which of the following costs would decrease if production levels were increase within the relevant range?
Which of the following costs would decrease if production levels were increased within the relevant range? Total fixed costs. Reason – Total fixed costs are fixed or constant in total, it would not be affected by increase or decrease in the production.
What effect does an increase in activity in the activity level have on unit fixed costs total fixed costs total variable costs?
As the level of activity increases, the fixed cost per unit decreases. The total fixed cost remains the same. Examples of fixed costs include rent, depreciation, patent amortization, property insurance, property taxes, and fixed salaries of production executives and indirect labor.
Why is determination of a relevant range important?
Why is relevant range important? Relevant range is important because if you make the assumption that all of your costs will remain constant, whether they are fixed or variable, you may make errors on your projections.
What is the importance of the relevant range?
Relevant range is important because if you make the assumption that all of your costs will remain constant, whether they are fixed or variable, you may make errors on your projections.
What effect does an increase in the activity level have on total fixed costs?
As the level of activity increases, the fixed cost per unit decreases. The total fixed cost remains the same.
What does the term relevant range mean quizlet?
Terms in this set (33) The term "relevant range" as used in cost accounting means the range over which. A. relevant costs are incurred.
What is the relevant range of activity?
The relevant range is the range of activity (e.g., production or sales) over which these relationships are valid. For example, if the factory is operating at capacity, increasing production requires additional investment in fixed costs to expand the facility or to lease or build another factory.
What happens to total costs if the activity level increases 10?
vary in total directly and proportionately with changes in the activity level. If activity level increases by 10%, total variable costs will increase by 10%. It remains the same per unit at every level of activity.
When the level of activity decreases variable costs will quizlet?
Decreased activity: total variable costs decrease proportionately while variable cost per unit still remains constant. (Phone bill example.) In summary, for variable costs, total costs change in DIRECT PROPORTION relative to activity level while costs per unit remain constant. You just studied 4 terms!
When activity is increasing the variable cost per unit?
As activity level increases, the mixed cost line increases at an amount equal to the variable cost per unit. One example of a mixed cost is a telephone bill: there is a flat charge (fixed cost), even if no calls are made, but the total telephone expense increases as calls (variable costs) are made.
What effect does an increase in the activity level have on total variable cost?
What happens when activity level increases? total variable cost increases AND variable cost per unit remains constant.
What happens to total fixed cost as the activity level increases decreases?
Fixed costs do not vary with the production level. Total fixed costs remain the same, within the relevant range. However, the fixed cost per unit decreases as production increases, because the same fixed costs are spread over more units.
How does relevant range relate to the behavior of the cost?
The relevant range is the range of activity where the assumption that cost behavior is a straight line (linear) is reasonably valid. Managerial accountants like to assume that the relationship between a cost and an activity run in a straight line.
What happens to fixed cost per unit as the activity level increases decreases?
As the level of activity increases, the fixed cost per unit decreases. The total fixed cost remains the same.