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Cost Z is fixed in total for a period.
if the level of activity in the period is increased by 50% what change would occur in cost Z per unit of activity?
answersheet answer:decrease by a thirdhow to do this question,sir?
pls help.thanks sir!
Let’s say the cost = $12,000 and the level of activity = 1,000 units. Cost/unit = 12,000/1,000 = $12.
Now, if the activity level rises by 50% to 1,500 units, cost/unit = 12,000/1,500 = $8
The original $12/unit has decreased by 1/3 to $8/unit.
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