Average Fixed Costs in the Short Run

question 193

Multiple Choice

Average fixed costs in the short run

• A) increase as the quantity produced increases.
• B) decrease as the quantity produced increases.
• C) first decrease, then increase eventually as the quantity produced increases.
• D) first increase, then decrease eventually as the quantity produced increases.

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Definitions:

Direct Materials Price

The cost of raw materials and components required for the manufacture of a product.

Direct Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected quantity, multiplied by the standard cost per unit.

Direct Materials Price Variance

The difference between the actual cost of direct materials and the expected (or standard) cost, used in manufacturing and budgeting.

Direct Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected quantity, multiplied by the standard cost per unit of material.