Cost Behavior Patterns

Question 1

What happen to FIXED and VARIABLE cost per unit when production levels are expected to increase within a relevant range, and a flexible budget is used?

Answer 1

Fixed cost per unit will increase(+) and variable per unit will be unchanged.

Question 2

When production level is expected to decrease within a relevant range, what effect will it have FIXED and VARIABLE cost per unit?

Answer 2

Fixed cost per unit will decrease(-) and variable per unit be unchanged.

Question 3

When using a flexible budget, a decrease in production levels within a relevant range will cause what to happen?

Answer 3

Decreases total costs. This is cause from a decrease in total variable cost because of the production of fewer units.