Variable cost per unit and total fixed costs remain constant in the relevant range. Therefore, total fixed costs should not change with the change in activity level and you would take the variable cost per unit times the new activity level to generate the flexible budget line item.

Question

Variable cost per unit and total fixed costs remain constant in the relevant range.  Therefore, total fixed costs should not change with the change in activity level  and you would take the variable cost per unit times the new activity level to generate  the flexible budget line item.

BlackTom AI · Accepted Answer

Fixed costs do not change with activity within the relevant range, so the flexible budget adjusts only the variable portion by multiplying the per‑unit variable cost by the new activity level.

1. Identify and explain the relevant knowledge points and concepts
- Fixed costs: costs that remain constant in total over the relevant range (e.g., rent, salaries).
- Variable costs: costs that change in direct proportion to activity (expressed as variable cost per unit).
- Relevant range: the activity interval over which cost behavior assumptions hold.
- Flexible budget: a budget that recalculates expected costs at a different activity level, keeping fixed totals constant and scaling variable costs by the new activity.

2. Complete reasoning process step by step
- Let FC = total fixed costs (constant), v = variable cost per unit, Qnew = new activity level.
- In a flexible budget, total variable cost at Qnew equals v × Qnew.
- Total cost in the flexible budget equals FC + (v × Qnew).
- Because FC does not change within the relevant range, only the variable portion changes when activity changes.

3. For calculations, show all intermediate steps (symbolic and numeric example)
- Symbolic: Total Costnew = FC + v × Qnew.
- Numeric example: If FC = $1,000, v = $5 per unit, original Q = 200 (original variable = $1,000; total original = $2,000). For Qnew = 300: variable = $5 × 300 = $1,500; Total Costnew = $1,000 + $1,500 = $2,500. Fixed portion stays $1,000.

4. Explain WHY the correct answer is correct
- The flexible budget’s purpose is to reflect cost behavior at a different activity level. Because fixed costs are constant in total within the relevant range, they remain unchanged; variable costs are proportional to activity, so one multiplies the per‑unit variable cost by the new activity to obtain the flexible budget line item.

5. Why the other option (False) is incorrect
- Marking False would imply either fixed totals change with activity or variable cost per unit must be recalculated; both contradict the premise. Only if costs are mixed, stepped, or the activity moves outside the relevant range would fixed totals or per‑unit behavior change.

6. Conclusion
Therefore, the statement is True, which matches the provided answer.

Variable cost per unit and total fixed costs remain constant in the relevant range. Therefore, total fixed costs should not change with the change in activity level and you would take the variable cost per unit times the new activity level to generate the flexible budget line item.判断题

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