a.
Concept Introduction:
Activity level is defined as how an activity is used by a cost object / other activity. Different activity often has different cost drivers. The five levels of activities are unit-level activities, batch-level activities, customer-level activities, production level activities and organization sustaining activities. Maximum contribution at a particular level of activity will show the maximum profitability position.
To explain: The effect of an increase in activity level on average fixed costs per unit.
b.
Concept Introduction:
Activity level is defined as how an activity is used by a cost object / other activity. Different activity often has different cost drivers. The five levels of activities are unit-level activities, batch-level activities, customer-level activities, production level activities and organization sustaining activities. Maximum contribution at a particular level of activity will show the maximum profitability position.
To explain: The effect of an increase in activity level on variable costs per unit.
c.
Concept Introduction:
Activity level is defined as how an activity is used by a cost object / other activity. Different activity often has different cost drivers. The five levels of activities are unit-level activities, batch-level activities, customer-level activities, production level activities and organization sustaining activities. Maximum contribution at a particular level of activity will show the maximum profitability position.
To explain: The effect of an increase in activity level on total fixed costs.
d.
Concept Introduction:
Activity level is defined as how an activity is used by a cost object / other activity. Different activity often has different cost drivers. The five levels of activities are unit-level activities, batch-level activities, customer-level activities, production level activities and organization sustaining activities. Maximum contribution at a particular level of activity will show the maximum profitability position.
To explain: The effect of an increase in activity level on total variable costs.
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Managerial Accounting
- Describe how total variable costs and unit variable costs behave with changes in the level of activityarrow_forwardWhich of the following graphs best illustrates fixed costs per unit as the activity base changes?arrow_forwardDescribe how total variable costs and unit variable costs behave with changes in the level of activity.arrow_forward
- Describe how total fixed costs and unit fixed costs behave with changes in the level of activity.arrow_forwardWhich of the following statements is true regarding average fixed costs? A. Average fixed costs per unit remain fixed regardless of level of activity. B. Average fixed costs per unit rise as the level of activity rises. C. Average fixed costs per unit fall as the level of activity rises. D. Average fixed costs per unit cannot be determined.arrow_forwardIn the cost equation Y=a+bx, Y represents which of the following? A. fixed costs B. variable costs C. total costs D. units of productionarrow_forward
- What is the effect of an increase in activity on the following items? a. Total variable costs b. Variable cost per unit of activity c. Total fixed costsd. Fixed costs per unit of activityarrow_forwardHow does the variable cost per unit change as the level of activity (or cost driver) increases? Why?arrow_forwardDescribe how total fixed costs and unit fixed costs behave as the level of activity increases?arrow_forward
- How does the fixed cost per unit change as the level of activity (or cost driver) increases? Why?arrow_forwardWhat effect does an increase in volume have on: Unit fixed costs? Unit variable costs? Total fixed costs? Total variable costs?arrow_forwardWhat is the term used to describe costs that increase in steps? A. Variable costs B. Fixed costs C. Mixed costs D. Semi-fixed costsarrow_forward
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