Asked by SIMNIKIWE MASIKITI on Apr 29, 2024
Verified
As activity level increases, total variable costs:
A) increase proportionately with activity.
B) decrease proportionately with activity.
C) increase by a fixed amount.
D) decrease by a fixed amount.
Total Variable Costs
The sum of all costs that vary with the level of production or service delivery, such as materials and labor.
Activity Level
A measure of the amount of work or output produced in a specific period, often used in cost accounting to allocate variable costs.
- Outline the implications of activity levels on the pattern of cost behavior, focusing on how production volume interplays with costs that are variable and those that are fixed.
Verified Answer
ZK
Zybrea KnightMay 03, 2024
Final Answer :
A
Explanation :
Total variable costs increase proportionately with activity level. This is because variable costs are directly related to the amount of production or output, so as activity level increases, the cost of materials, labor, and other variable expenses also increases.
Learning Objectives
- Outline the implications of activity levels on the pattern of cost behavior, focusing on how production volume interplays with costs that are variable and those that are fixed.