COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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fixed and variable costs per unit will change
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fixed and variable costs per unit will remain the same
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fixed costs per unit will remain the same and variable costs per unit will change
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fixed costs per unit will change and variable costs per unit will remain the same
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Detailed explanation-1: -Answer and Explanation: The correct answer is letter d. fixed costs per unit will change and variable costs per unit will remain the same.
Detailed explanation-2: -Answer and Explanation: When the level of activity increases within the relevant range, the average cost per unit will fall as fixed costs per unit decrease. Total variable costs will increase as they are tied to increases in activity.
Detailed explanation-3: -Although total variable cost increases when activity increases, the rate is only constant within the relevant range. Total fixed cost can behave in a step-cost manner when outside the relevant range..
Detailed explanation-4: -Answer and Explanation: The correct option is (B) variable costs per unit are constant and fixed costs per unit fluctuate. Within the relevant range, total fixed costs remain the same. If the number of units changes (increase or decrease), the total fixed cost is spread across the changed units.
Detailed explanation-5: -Variable costs vary in a linear fashion with the production level. However, when stated on a per unit basis, variable costs remain constant across all production levels within the relevant range.