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Which cost will change with a decrease in activity within relevant range?
unit fixed costs and total variable cost
Will total variable costs increase if the level of activity increases within the relevant range?
yes
What happens Cost driver activity level increases within the relevant range?
total fixed costs remain unchanged
Which costs will change with an increase in activity within the relevant range?
Unit Fixed Cost and Total Variable Cost Kenny Kalejaiye
What are the steps to developing a flexible budget?
The flexible budget uses the master budget as its basis. To develop the flexible budget, management should take the following steps. 1. Identify the activity index and the relevant range of activity. 2. Identify the variable costs, and determine the budgeted variable cost per unit of activity for each cost. 3. Identify the fixed costs, and determine the budgeted amount for each cost. 4. Prepare the budget for selected increments of activity within the relevant range.
Which cost will change with a decrease in activity within relevant range?
unit fixed costs and total variable cost
Will total variable costs increase if the level of activity increases within the relevant range?
yes
What happens Cost driver activity level increases within the relevant range?
total fixed costs remain unchanged
Which costs will change with an increase in activity within the relevant range?
Unit Fixed Cost and Total Variable Cost Kenny Kalejaiye
Define relevant range in accounting?
an increase or decrease on a company's fixed costs is however not only dependent on the relevant period but also on the relevant production range. The total fixed costs will remain constant if the relevant production range can be handled by the same number of production units, producing fewer steps. If a certain step ( certain cost level) encompasses the entire relevant range of activity, the costs are entirely fixed.
Why it is necessary to classify cost by behavior?
It is necessary when making decisions to classify costs by behaviour as you need to know how costs and revenues vary with different levels of activity/volume.Variable costs change with the level of activity. For example, doubling volume would double the variable costs. An example of a variable cost would be direct labour, direct materials within manufacturing.Fixed costs remain the same over a wide range of activity for a specified time period. An example of a fixed cost is rent, supervisors' salary, insurance, etc.Step-Fixed costs are costs which are fixed within specific activity levels. For example, if a supervisor can only supervise 100 people when there are more than a 100, then another supervisor needs to be hired. This can be a step increase or decrease depending on the change in activity levels.Semi-Variable costs (Mixed costs) have a variable and a fixed component. For example, telephone line may have a fixed line rental with a variable metered call.Therefore, knowing the differences between the costs can allow you to calculate future costs and revenues relevant to different decisions.
What are the steps to developing a flexible budget?
The flexible budget uses the master budget as its basis. To develop the flexible budget, management should take the following steps. 1. Identify the activity index and the relevant range of activity. 2. Identify the variable costs, and determine the budgeted variable cost per unit of activity for each cost. 3. Identify the fixed costs, and determine the budgeted amount for each cost. 4. Prepare the budget for selected increments of activity within the relevant range.
How would you describe total fixed costs?
Total fixed costs do not vary as volume levels change within the relevant range.
Variable costs are relevant and fixed costs are irrelevant?
Generally variable costs are relevant costs but if due to any decision fixed costs are also going to affected then fixed costs are also relevant costs.
Are marginal costs relevant costs?
If marginal costs are relevant for specific situation or specific decision making scenario then marginal costs are relevant costs otherwise marginal costs can be irrelevant.
What are some of your personal fixed costs and variable costs?
Fixed costs are those expenses that do not change in proportion to the activity within the relevant period. And variable costs are costs that can be varied flexibly as the conditions change. So your personal fixed cost could be the fix line rent that you pay for the cell phone or the admission fee of your school. The variable costs could be your monthly shopping, tuition fees that depends on the courses etc.
What happens to sales when fixed costs decrease?
When fixed costs decrease, what does this do for sales?
