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Business

Accounting

why does fixed costs remain the same in total dollar amount but increases per unit as the level of activity changes

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter6: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 5DQ

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

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Would each of the following increase, decrease, or have an indeterminant effect on a firms break-even point (unit sales)? a. The sales price increases with no change in unit costs. b. An increase in fixed costs is accompanied by a decrease in variable costs. c. Variable labor costs decline; other things are held constant.
When 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 unit
Fixed costs are expenses that ______________________________ . A. vary in response to changes in activity level B. remain constant on a per-unit basis C. increase on a per-unit basis as activity increases D. remain constant as activity changes
Variable costs are expenses that ____________________________ . remain constant on a per-unit basis but change in total based on activity level remain constant on a per-unit basis and remain constant in total regardless of activity level decrease on a per-unit basis as activity level increases remain constant in total regardless of activity level within a relevant range
The contribution margin is the a. amount by which sales exceed total fixed cost. b. difference between sales and total cost. c. difference between sales and operating income. d. difference between sales and total variable cost. e. difference between variable cost and fixed cost.
The amount of a units sales price that helps to cover fixed expenses is its ____________________. A. contribution margin B. profit C. variable cost D. stepped cost
When 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 cost
In the fixed cost per unit does the it increase as activity decreases and will decrease as activity increases?
Which of the following describes the behavior of the fixed cost per unit? a.remains constant with changes in production b.decreases with decreasing production c.decreases with increasing production d.increases with increasing production
Which of the following statements is CORRECT with respect to fixed costs per unit? Select one: A. They will decrease as production decreases. B. They will remain the same as production levels change. C. They will increase as production increases. D. They will increase as production decreases.
Which of the following describes the behavior of the fixed cost per unit? Decreases with decreasing production Decreases with increasing production Increases with increasing production Remains constant with changes in production
Which of the following statements is CORRECT with respect to fixed costs per unit? Select one: A.They will decrease as production decreases. B.They will increase as production increases. C.They will increase as production decreases. D.They will remain the same as production levels change.