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Which costs wilchange with a decrease in activity within the relevant range?
With a decrease in activity within the relevant range, variable costs will typically decrease as they are directly proportional to the level of activity, such as production or sales volume. Fixed costs, on the other hand, remain unchanged within the relevant range regardless of the activity level. However, if the decrease in activity is significant enough to fall outside the relevant range, some fixed costs may become variable or change. Overall, the primary impact will be a reduction in total variable costs.
Will total variable costs increase if the level of activity increases within the relevant range?
yes
Explain what is meant by relevant range of activity and its significance in CVP analysis?
The relevant range of activity refers to the specific volume of production or sales within which the assumptions of cost behavior—such as fixed and variable costs—remain valid. It is significant in Cost-Volume-Profit (CVP) analysis because it helps businesses understand how costs and profits will behave at different levels of activity. Outside this range, fixed costs may change, or variable costs might not remain constant, potentially distorting financial forecasts and decision-making. Thus, accurately identifying the relevant range is crucial for effective planning and analysis.
Which cost will change with a decrease in activity within relevant range?
unit fixed costs and total variable cost
Which costs will change with an increase in activity within the relevant range?
Unit Fixed Cost and Total Variable Cost Kenny Kalejaiye
Which costs wilchange with a decrease in activity within the relevant range?
With a decrease in activity within the relevant range, variable costs will typically decrease as they are directly proportional to the level of activity, such as production or sales volume. Fixed costs, on the other hand, remain unchanged within the relevant range regardless of the activity level. However, if the decrease in activity is significant enough to fall outside the relevant range, some fixed costs may become variable or change. Overall, the primary impact will be a reduction in total variable costs.
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
Will total variable costs increase if the level of activity increases within the relevant range?
yes
Explain what is meant by relevant range of activity and its significance in CVP analysis?
The relevant range of activity refers to the specific volume of production or sales within which the assumptions of cost behavior—such as fixed and variable costs—remain valid. It is significant in Cost-Volume-Profit (CVP) analysis because it helps businesses understand how costs and profits will behave at different levels of activity. Outside this range, fixed costs may change, or variable costs might not remain constant, potentially distorting financial forecasts and decision-making. Thus, accurately identifying the relevant range is crucial for effective planning and analysis.
Which cost will change with a decrease in activity within relevant range?
unit fixed costs and total variable cost
Which costs will change with an increase in activity within the relevant range?
Unit Fixed Cost and Total Variable Cost Kenny Kalejaiye
What is a variable for the number 9?
There is no relevant variable.
Explain the concept of the relevant range?
The relevant range refers to the level of activity or volume within which fixed and variable cost behavior remains consistent. It is the range of production or sales levels where the assumptions about cost behavior, such as fixed costs remaining constant and variable costs per unit being stable, are valid. Outside this range, costs may change, potentially leading to different cost structures and affecting decision-making. Understanding the relevant range is crucial for budgeting, forecasting, and cost management.
Is variable cost a relevant cost?
No. If a variable cost does not differ between alternatives than it is irrelevant.
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 costs decrease in activity within the relevant range?
Within the relevant range, variable costs decrease per unit as production volume increases, due to the spreading of fixed costs over a larger number of units. Additionally, economies of scale may lead to lower average costs as production increases, often resulting in decreased costs for materials or labor per unit. However, total fixed costs remain constant within this range, since they do not change with the level of activity.
Relevant range of activity?
The relevant range of activity refers to a the current level of production. If production drops or increases, then the relevant range will change.
