Question

Cost A Cost B Cost C Total Costs 60,000 units $75,000 $120,000 $65.000 $260,000 90.000 units $75,000 $180,000 $80,000 $335,000 Cost A is a cost 100 Desc O A. sunk O B. mixed O C. fixed atured Si OD. variable costs per ange Click to select your answer. 654 PN 11/520 A 0 RS2 Delete Insert Prisc

Answer 1

Ans:	Option C. Fixed
Explanation	Cost A is fixed cost because it is same at both activity levels i.e. at 60000 and 90000 units. Fixed Costs do not vary with the level of output.

High-Low Method:-
	Variable Cost per snow cone		=	Highest Total Operating Cost - Lowest Total Operating Cost
				Highest Activity units (snow cones) - Lowest Activity units (snow cones)
			=	$7000 - $4000
				9000 - 4000
			=	$3,000
				5000
	Variable Cost per snow cone		=	$0.60
	Fixed Cost		=	Highest Total Operating Cost	-	(	Variable cost per snow cone	×	Highest Activity units (snow cones)	)
			=	$7,000	-	(	$0.60	×	9000	)
			=	$7,000	-		$5,400
	Fixed Cost		=	$1,600
	Variable Cost per snow cone		=	$0.60
	Fixed Cost		=	$1,600
		Option B $1600 is correct.

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