Question

-Identify the following costs:

x Fixed Cost

x Variable Cost

x Mixed Cost

-Explain the behavior of a fixed cost, in total and per unit, when the activity level changes.

-Explain the behavior of a variable cost, in total and per unit, when the activity level changes.

Answer 1

Ans. A
1	Variable costs :   A cost that varies with the level of production or sales, known as variable cost.
	Total variable cost increase or decrease in the proportion of sales or production units that's why
	the variable cost per unit always remians same in each level of output.
2	Fixed cost :    A cost that does not change in the proportion of output, is known as fixed cost.
	Total fixed cost always remians constant, but fixed cost per unit increases if the output decreases
	and decreases if the output increases.
3	Mixed cost : A cost that contains variable and fixed (both) components, is known as mixed cost.
	Neither total mixed cost nor unit mixed cost remains constant on each level of production.
Ans. B	*Total fixed cost remain constant on each level of activity.
	Fixed cost per unit decreases as per activity increase and increases as per activity
	decrease.
	Total variable cost increases in the proportion of sales. In other words total variable
	cost increases if activity increase and decreases if activity decrease.
	Variable cost per unit remain constant on each level of activity.