A Curvilinear Relationship Between Variable Costs and Changes in Activity

question 78

Multiple Choice

A curvilinear relationship between variable costs and changes in activity levels suggests what?

• A)A strictly linear relationship between fixed costs and activity levels is implausible.
• B)A strictly curvilinear relationship between changes in activity levels and variable costs is possible only within the relevant range.
• C)Since the relationship between activity levels and variable costs is linear within the relevant range and less linear at lower and higher levels outside the relevant range, the straight-line (linear)relationship takes on a curvature in the real world.
• D)none of the above

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Definitions:

Sales Price Variance

The difference between the actual sales price of a product and its expected (or standard) sales price.

Sales Volume Variance

The difference between the actual quantity sold and the budgeted quantity sold, multiplied by the standard selling price per unit.

Purchasing Department

The division within a company responsible for acquiring goods and services necessary for the business operations.

Price Paid

The total monetary expenditure incurred to acquire a product or service, which includes the purchase price and any additional costs.