How do total variable costs behave as production increases? (Definition of linear: arranged/extending along a straight line) Decrease nonlinearly Increase linearly Stay constant Increase nonlinearly Decrease linearly
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How do total variable costs behave as production increases?
(Definition of linear: arranged/extending along a straight line)
- Decrease nonlinearly
- Increase linearly
- Stay constant
- Increase nonlinearly
- Decrease linearly
There are two main types of costs – fixed costs and variable costs.
Fixed costs remains constant irrespective of the level of output or production.
Variable costs, on the other hand, is a constant amount per unit of product and hence total variable costs increases as production or output level increases.
This is because total variable cost = variable cost per unit*no. of units
Hence as the no. of units produced increases total variable cost also increases.
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- When variable costs increase and all other variables remain unchanged, the break-even point will ____________________. A. remain unchanged B. increase C. decrease D. produce a lower contribution marginWhen fixed costs increase and all other variables remain unchanged, the contribution margin will A. remain unchanged _____________________. B. increase C. decrease D. increase variable costs per unitA scatter graph is used to test the assumption that the relationship between cost and activity level is __________________________. A. curvilinear B. cyclical C. unpredictable D. linear
- When fixed costs decrease and all other variables remain unchanged, the break-even point will _______________. A. remain unchanged B. increase C. decrease D. produce a lower contribution marginWhen should a segment be dropped? A. only when the decrease in total contribution margin is less than the decrease in fixed cost B. only when the decrease in total contribution margin is equal to fixed cost C. only when the increase in total contribution margin is more than the decrease in fixed cost D. only when the decrease in total contribution margin is less than the decrease in variable costWhich 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.
- What is characteristic of variable costs within the relevant range? A. Decrease in total as as output increases B. Stay constant in total as output increases C. Decrease on a per-unit basis as output increases D. Stay constant on a per-unit basis as output changesBreak-even analysis assumes over the relevant range that Group of answer choices total variable costs are linear. fixed costs per unit are constant. total variable costs are nonlinear. total revenue is nonlinear.Assume that a straight line on a CVP chart intersects the vertical axis at the level of fixed costs and has a positive slope that rises with each additional unit of volume by the amount of the variable costs per unit. What does this line represent?
- Variable costs and fixed costs can best be described by which of the following when production levels decrease? Total fixed costs decrease, but fixed costs per unit stay constant. Fixed costs per unit stay constant, but variable costs per unit decrease. Fixed costs per unit increase, but variable costs per unit stay constant. Total variable costs stay constant , but variable costs per unit decrease .Show how each of these costs will behave as the volume of activity decreases. Variable cost per unit Total variable cost Fixed cost per unit Total fixed cost A. Increase B. Decrease C. Remains the sameOn a CVP graph, the total cost line intersects the vertical (dollars) axis at the origin. the level of fixed costs. the breakeven point. the level of the variable costs.
