Week 2, Topic 4

Question 1

Variable costs

Answer 1

in total - proportional to the activity level within relevant range

per unit- remains the same over ranges of activity

Question 2

fixed costs

Answer 2

in total - remain the same even when the activity level changes within relevant range

per unit- average fixed costs per unit decrease as the activity level increases

Question 3

what are step fixed costs

Answer 3

increase in stages - eg we employ one supervisor on a fixed wage of 18,000 for production of 5,000 tennis rackets, between 5,000 and 10,000 tennis rackets two supervisors are required at a cost of 36,000

Question 4

Semi variable costs

Answer 4

fixed costs mixed with variable costs - eg fixed charge for electricity plus a variable element for power usage