- Variable costs will only vary at a constant cost per unit only within a specified range of output
and sales, beyond which it changes. Similarly, fixed costs are only fixed within a specified
relevant range only, beyond which they change as extra machines are purchased, hired, etc.
- The learning curve effect also makes variable costs and fixed production costs to change over
time.
- The random interference of factors beyond the organization?s control e.g. technology changes
and government regulations, may also make fixed and variable costs to behave differently.
Thus, fixed and variable costs will only be well behaved only and only if the activity levels
are within the relevant range.
marto answered the question on February 15, 2019 at 09:14
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