If the Activity Level Increases, What Happens to the Total

question 60

Multiple Choice

If the activity level increases, what happens to the total fixed cost?

• A)It decreases.
• B)It increases.
• C)It remains the same.
• D)It depends on how much the activity level increases.

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Definitions:

Favorable Variances

Differences between actual and budgeted or standard cost figures that are financially beneficial to a company.

Unfavorable Variances

Differences where actual results are worse than expected, often leading to higher costs or lower revenues.

Raw Materials Inventory

The total cost of all the raw materials that are used in the manufacturing process but have not yet been converted into finished goods.

Raw Materials Purchase

The procurement of unprocessed materials used in the manufacturing or production of finished goods.