Question

Samsung is thinking of expanding sales of its most popular smartphone model by 65%. Should we expect its variable and fixed costs for this model to stay within the relevant range? You make want to make sure to explain what the relevant range is and how costs behave within the range before answering the question regarding Samsung.

Answer 1

Answer)

Here the variable costs of materials must decrease as the samsung is in the position to bargain with the supplier for good discount as it's raw material purchases are going to get increased by 65%. Other variable costs like labour etc may remain constant.However the labour costs and other variable overhead may decrease if the labour have gained more efficiency in producing the product.

Now coming to the fixed costs, they may increase at while of the current level of capacity may not be sufficient to produce the targeted production.However,The fixed costs may be remain constant or there are chances for decreasing per unit by dividing the total fixed costs by total units of production.

Hence,based on above explanation the we can expect the costs to be in relevant range provided that there will be no idle time observed.