An Increase in the Level of Activity Will Have the Following

question 56

Short Answer

An increase in the level of activity will have the following effects on unit costs for variable and fixed costs: $\begin{array}{ll}&\text { Unit Variable Cost } & \text { Unit Fixed Cost } \\A.&\text { Increases } & \text { Decreases } \\B.&\text { Remains constant } & \text { Remains constant } \\C.&\text { Decreases } & \text { Remains constant } \\D.&\text { Remains constant } & \text { Decreases }\end{array}$

Analyze the differences between actual and budgeted costs.

Evaluate the performance of a company using flexible budget reports.

Understand the role of fixed and variable costs in budgeting and variance analysis.

Utilize cost per unit and per activity measures in budgeting processes.

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Definitions:

Level Strategy

An inventory management strategy where production rates or workforce levels are kept constant despite demand fluctuations.

Formal Planning Model

A structured approach to planning that involves systematic procedures and methodologies to achieve specified objectives.

Pure Level Strategy

A production strategy where the output rates are kept constant and inventory is used to absorb fluctuations in demand.

Aggregate Planning

The process of creating a production plan to meet demand over a medium-term horizon by adjusting production rates, workforce levels, and inventory levels.