What effect does an increase in the activity level have on variable costs per unit?
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October 7, 2014 at 3:15 pm #203742 
A company has prepared flexed budgets at two activity levels. The cost per unit of three costs is given below. All three costs behave in a linear manner with respect to activity. Activity level (units) Cost 10,000 15,000 Is each of the
costs variable, semi-variable or fixed? Why is Z a semi-variable cost? October 7, 2014 at 3:40 pm #203748
Z cannot be completely variable – it is was, then the cost per unit would be the same. It cannot be completely fixed either, because if it was then the total cost would be the same. As it is, the total at 10,000 is 1000 x 3.5 = $35,000, but the total at 15,000 is 15,000 x $3 = $45,000. So….it must be semi-variable (i.e. part fixed and part variable). October 7, 2014 at 3:52 pm #203753
Thank you very much!!!! October 7, 2014 at 7:33 pm #203772
You are welcome, Barbara 🙂 January 22, 2015 at 9:01 am #223344 Mariam
i have a query…what if ur asked whats the relation between an increase or decrease in the activity level of a semi variable cost,what would happen to the cost per unit? would it decrease or increase ? January 22, 2015 at 9:11 am #223346
The variable cost per unit will stay unchanged. However with regard to the fixed cost, if the activity increases then the fixed cost per unit will fall, and therefore the total cost per unit will fall. (Vice versa if the activity level falls). January 22, 2015 at 10:15 am #223352 Mariam
so when the activity increases or decreases in semi variable costs, the variable cost per unit remains constant? January 22, 2015 at 10:23 am #223353 Mariam
how about variable and step fixed costs January 22, 2015 at 11:44 am #223367 EFAGCollege
what is fixed variable? January 22, 2015 at 1:38 pm #223399
Mariam: The cost per unit is partly the variable cost and partly the fixed cost. If there is a step-up in the fixed costs, then there will be a step-up also in the fixed cost per unit, but the variable cost per unit will stay constant. January 22, 2015 at 1:40 pm #223400
EFAGCollege: A variable cost is where the total cost changes with the level of activity. The variable cost per unit is fixed – so more units means more total variable cost, fewer units means less variable cost. The free lecture on this will help you. January 22, 2015 at 6:35 pm #223439 Mariam
so lets say for instance, an increase of 10 percent was noted in the activity level, what effect would it have on the following costs January 23, 2015 at 9:00 am #223506
Fixed costs: total fixed costs will not change; fixed cost per unit will fall Variable costs: total variable cost will increase; variable cost per unit will not change Semi-variable: total cost will increase; cost per unit will decrease step fixed costs: total cost will not change, except at the level of activity where the step occurs – at that level it will increase (and
then stay at the new level). Have you watched the free lecture? What effect does an increase in the activity level have on total fixed costs?Fixed costs are costs that are fixed in total and do not vary in relation to the changes in activity level. As the activity level increases, the fixed cost per unit will decrease because the total amount is fixed and will be distributed in an increased activity level on a per-unit basis.
What effect does an increase in the activity level have on unit fixed cost unit variable cost total fixed cost total variable cost?The higher the level of activity, the lower the fixed cost per unit. Fixed costs have two main characteristics: (a) The total cost remains fixed, regardless of changes in the level of activity; (b) The cost per unit varies inversely with changes in the level of activity.
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