FINC 577 Chapter 5 Notes Outline

Total fixed costs of the facilities remain constant

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Unformatted text preview: f the facilities remain constant at every level of activity - $10,000 per month. Fixed costs on a per unit basis vary inversely with per activity - as activity increases, unit cost declines and and vice versa. At 2,000 radios, the unit cost is $5 ($10,000 $5 ($10,000 2,000 units). At 10,000 radios, the unit cost is $1 ($10,000 $1 10,000 units). Chapter 5-11 Fixed Costs - Graphs Chapter 5-12 Relevant Relevant Range Throughout the range of possible levels of activity, a straight-line relationship usually does not exist for either variable costs or fixed costs. The relationship between variable costs and changes in activity level is often curvilinear. For fixed costs, the relationship is also nonlinear – some fixed costs will not change over the entire range of activities while other fixed costs may change. Chapter 5-13 Relevant Relevant Range - Graphs Chapter 5-14 Relevant Relevant Range Defined Defined as the range of activity over which a company _______________________________. Within this range, a strai...
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This document was uploaded on 01/19/2014.

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