ACCT 2300_chapter 4 quiz solutions

ACCT 2300_chapter 4 quiz solutions - ACCT 2300 Chapter 4...

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ACCT 2300 Chapter 4 Quiz 1. A is a fixed cost; B is a variable cost. During the current year the level of activity has decreased but is still within the relevant range. We would expect that: a. The cost per unit of A has remained unchanged. b. The cost per unit of B has decreased. c. The cost per unit of A has decreased. D . The cost per unit of B has remained unchanged. The relevant range is the range in which our assumptions about costs holds true. So, that means for variable costs, the TOTAL costs will increase with increases in output but cost per unit will remain the same. For fixed costs, TOTAL costs will remain unchanged, but costs per unit will vary relative to changes in output. As our output increases our fixed costs per unit decrease because we are spreading the cost over more output. As output decreases, fixed costs per unit increase because we are spreading the costs over fewer units. So, if activity is decreasing, as per our question above, we expect A -our fixed costs PER UNIT - to increase but B- our variable cost per unit - will remain unchanged. Our

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ACCT 2300_chapter 4 quiz solutions - ACCT 2300 Chapter 4...

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