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As activity decreases, unit variable costs typically remain constant since they are incurred on a per-unit basis regardless of the level of production. However, if production falls below a certain level, fixed costs may become spread over fewer units, potentially increasing the overall unit cost. In essence, while variable costs per unit do not change with activity levels, the total cost per unit can rise due to the allocation of fixed costs.
What else can I help you with?
A variable cost changes in proportion to changes in the volume in activity?
the answer is Variable Cost
When do variable cost change?
Variable costs change in direct proportion to the level of production or activity. As output increases, variable costs rise because they are tied to the quantity of goods produced, such as raw materials and labor directly involved in production. Conversely, if production decreases, variable costs will also fall. This relationship makes variable costs essential for budgeting and forecasting in businesses.
Is cost of fuel a variable cost?
Yes, the cost of fuel is considered a variable cost because it fluctuates based on usage and market prices. As the amount of fuel consumed increases or decreases, the overall cost will change correspondingly. This makes it a key factor in the variable expenses of businesses that rely on transportation or machinery.
When using a flexible budget a decrease in activity within the relevant range does what?
I wanted to get this answered more fully, and correctly. Decreasing variable costs per unit is just wrong. When speaking of variable vs fixed costs, it means in total. A variable cost stays the same per unit, but as volume changes, the total variable costs increase and decrease. (Unless something specifically mentions there's a change per unit.) A fixed cost is fixed in total regardless of volume. But fixed per unit increases and decreases with volume changes. In order for variable and fixed to have their proper meanings, you have to think about them as total costs. For example, if I buy a certain shirt for $7 and sell it for $15, those are variable. They stay the same per unit and I gross $8 per shirt (called contribution margin). The more I sell, the more sales revenue I have and the more variable cost I have -- two shirts will have $7x2 ($14) of variable costs etc. If my fixed costs are $100,000, that will remain fixed regardless of how many of anything I sell. An example of a fixed cost is rent. If activity decreases, total variable costs will decrease, but not per unit variable costs. Total costs also decrease, but that's not complete. And fixed per unit increases, because you don't have as much volume to spread the fixed costs over.
Which cost will change with a decrease in activity within relevant range?
unit fixed costs and total variable cost
A variable cost changes in proportion to changes in the volume in activity?
the answer is Variable Cost
Is electricity cost a variable cost or a fixed cost?
It's a variable cost, as it changes with the change in activity level
Is the cost of fuel for vehicles a variable cost?
Variable cost: The cost change with the change in activity is called variable cost. So as much fuel used cost increased accordingly so it is variable cost.
A is a fixed cost b is a variable cost. during the current year the level of activity has decreaed but is still within the relevant range. we would expect that?
A remains constant and B decreases. profit decrease
What cost is not a fixed cost?
A cost which varies with the level of production activity is not a fixed cost and called variable cost.
The variable cost per unit?
remains constant as activity changes
How is the relative range of activity related to fix and variable cost?
not sure
Fixed cost per unit increases when?
when number of activity or units decreases
Is mortgage payment a variable cost?
Mortgage payment can either be fixed or variable cost. A fixed cost means the interest rate charged on the loan will remain the same for the loan's entire term. A variable cost means the interest rate changes or decreases as time pass.
When do variable cost change?
Variable costs change in direct proportion to the level of production or activity. As output increases, variable costs rise because they are tied to the quantity of goods produced, such as raw materials and labor directly involved in production. Conversely, if production decreases, variable costs will also fall. This relationship makes variable costs essential for budgeting and forecasting in businesses.
Is cost of fuel a variable cost?
Yes, the cost of fuel is considered a variable cost because it fluctuates based on usage and market prices. As the amount of fuel consumed increases or decreases, the overall cost will change correspondingly. This makes it a key factor in the variable expenses of businesses that rely on transportation or machinery.
A cost increases or decreases in intervals as activity changes?
This scenario likely represents a step-variable cost behavior, where costs remain constant within certain activity levels before increasing or decreasing in response to a change in activity. This type of cost behavior is characterized by step changes in costs instead of a continuous increase or decrease. Organizational decisions may need to account for these step changes when forecasting or managing costs.
