When a flexible budget is used, a decrease in the output level within the relevant range would: a. Not change fixed costs per unit. b. Decrease total fixed costs. c. Decrease total costs. d. Increase variable costs per unit.
Answer is option c - Decrease total costs
Decrease in the output level within the relevant range would decrease the total costs due to decrease in total variable costs (i,e. total variable cost would reduce as the output level decreases).
All other options are wrong because:
Fixed costs per unit will change as there is a change in output level. Hence, option a is wrong.
Total fixed costs would remain same within the relevant range of output. Hence, option b is also wrong.
Variable costs per unit remains same per unit within the relevant range but changes in total. Hence, option d is also wrong.
When a flexible budget is used, a decrease in the output level within the relevant range...
When using a flexible budget, a decrease in activity within the relevant range:decreases variable costs per unit.decreases total costs.increases total fixed costs.increases variable cost per unit.
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If the level of activity increases within the relevant range: O variable cost per unit and total cost also increase. O variable cost per unit and total fixed costs also increase. O fixed cost per unit and total variable cost also increase. O total cost will increase and fixed cost per unit will decrease.
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In a flexible budget, what will happen to fixed costs as the activity level increases? A. The fixed cost per unit will remain unchanged. B. The fixed cost per unit will increase. C. Fixed costs are not included in a flexible budget. D. The fixed cost per unit will decrease. E. Total fixed cost will increase.
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