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ADM2341 Chapter 6 Cost Behaviour

Range of activity 1000 2000 3000 rented area square

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Unformatted text preview: The relevant range of activity for a fixed cost is the range of activity over which the graph of the cost is flat. Example: Office space is Example: Office space is available at a rental rate of available at a rental rate of $30,000 per year in $30,000 per year in iincrements of 1,000 square ncrements of 1,000 square ffeet. As the business grows, eet. As the business grows, more space is rented, more space is rented, increasing the total cost. increasing the total cost. LO 1 6-24 Fixed Costs and Relevant Range How does this How type of fixed cost differ from a stepdiffer variable cost? Step-variable costs can be adjusted more quickly and . . . The width of the activity steps is much wider for the fixed cost. LO 1 6-25 Quick Check 1. 1. 2. 2. 3. 3. 4. 4. Which of the following statements about cost Which of the following statements about cost behaviour are true? behaviour are true? Fixed costs per unit vary with the level of Fixed costs per unit vary with the level of activity. activity. Variable...
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