Asked by Abigail Aleman on Jun 10, 2024
Verified
Costs that vary in total in direct proportion to changes in an activity level are called ______ costs.
A) fixed
B) sunk
C) variable
D) differential
Variable Costs
are expenses that change in proportion to the activity of a business, such as the cost of raw materials used in production.
Differential Costs
The difference in total cost that will result from selecting one alternative over another.
Fixed Costs
Fixed costs include payments like rent, salaries, and insurance that are unaffected by variations in production or sales volumes.
- Clarify the separation between fixed, variable, and mixed costs in real-world examples.
Verified Answer
NK
nyaboga kiageJun 11, 2024
Final Answer :
C
Explanation :
Variable costs change in direct proportion to changes in activity level, meaning they increase as activity increases and decrease as activity decreases. Fixed costs remain constant regardless of activity levels, sunk costs are past costs that cannot be recovered, and differential costs are the difference in cost between two alternatives.
Learning Objectives
- Clarify the separation between fixed, variable, and mixed costs in real-world examples.