Asked by Jacob Parker on Jun 17, 2024
Verified
Which of the following statements is true regarding fixed and variable costs?
A) Both costs are constant when considered on a per-unit basis.
B) Both costs are constant when considered on a total basis.
C) Fixed costs are constant in total, and variable costs are constant per unit.
D) Variable costs are constant in total, and fixed costs vary in total.
Variable Costs
Costs that vary directly and proportionally with the level of production or sales volume, such as raw materials and direct labor costs.
Fixed Costs
Charges that stay the same, no matter the production or sales figures, such as rental fees, employee salaries, and insurance premiums.
- Gain an understanding of the elementary notions in cost accounting and distinguish between different classifications of costs, such as fixed and variable.
Verified Answer
GA
gaming accountJun 20, 2024
Final Answer :
C
Explanation :
Fixed costs are constant in total, meaning that they do not change regardless of the level of output or sales. Variable costs, on the other hand, vary with the level of output or sales, meaning that they are constant per unit but not in total. For example, the cost of raw materials used to produce a product is a variable cost, where the cost per unit remains the same but the total cost increases as more units are produced.
Learning Objectives
- Gain an understanding of the elementary notions in cost accounting and distinguish between different classifications of costs, such as fixed and variable.