As the Level of Output Increases, What Happens to the Value

question 233

Essay

As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost?

---

Definitions:

Supplies Cost

The expense incurred to purchase supplies needed for the operation of a business.

Cost Formula

An equation used to determine the total cost of production or service delivery, factoring in fixed and variable costs.

Flexible Budget

A financial plan that modifies itself in response to variations in volume or activity intensity.

Spending Variance

The difference between the actual amount spent and the budgeted or standard amount expected to be spent.