When production levels are expected to increase within a relevant range,and a flexible budget is used,what effects would be anticipated with respect to each of the following?
Fixed Costs Variable Costs
Per Unit Per Unit
A)Decrease Increase
B)Decrease No Change
C)No Change No Change
D)No Change Increase

Question

Quizplus · Accepted Answer

When production levels increase within a relevant range, fixed costs remain the same because they are not affected by changes in activity levels. On the other hand, variable costs per unit are expected to remain constant in the short run. Therefore, using a flexible budget would result in a decrease in the fixed cost per unit and no change in the variable cost per unit since the production levels are within a relevant range. Hence, the best option is B, i.e., Decrease in Fixed Costs and No Change in Variable Costs per unit.

When Production Levels Are Expected to Increase Within a Relevant