Asked by Angelica Serrano on May 02, 2024
Verified
Dizzy Amusement Park is open from 8:00 am till midnight every day of the year. Dizzy charges its patrons a daily entrance fee of $30 per person which gives them unlimited access to all of the park's 35 rides.For liability insurance, Dizzy pays a set monthly fee plus a small additional amount for every patron entering the park. The cost of liability insurance would best be described as a:
A) fixed cost
B) mixed cost
C) step-variable cost
D) true variable cost
Mixed Cost
A cost composed of both fixed and variable components, changing in total with activity level but not proportionally.
True Variable Cost
Costs that vary exactly with the level of activity or production volume, including direct materials and some elements of manufacturing overhead.
Fixed Cost
Costs that do not vary with the level of output or sales, remaining constant regardless of the business activity level, such as rent and salaries.
- Comprehend the idea of mixed costs, which include a combination of fixed and variable parts.
Verified Answer
ZK
Zybrea KnightMay 05, 2024
Final Answer :
B
Explanation :
The cost of liability insurance is a mixed cost as it consists of a fixed portion (monthly fee) and a variable portion (additional amount for every patron entering the park).
Learning Objectives
- Comprehend the idea of mixed costs, which include a combination of fixed and variable parts.