Damon Company manufactures radios that contain a $10 digital clock. The activity index is the number…

Damon Company manufactures radios that contain a $10 digital clock. The activity index is the number of radios produced. As Damon manufactures each radio, the total cost of the clocks increases by $10. It shows, total cost of the clocks will be $20,000 if Damon produces 2,000 radios, and $100,000 when it produces 10,000 radios. We also can see that a variable cost remains the same per unit as the level of activity changes.

Damon Company manufactures radios that contain a $10 digital clock. The activity index is the number of radios produced. As Damon manufactures each radio, the total cost of the clocks increases by $10. It shows, the unit cost of $10 for the clocks is the same whether Damon produces 2,000 or 10,000 radios.