Homework Answers
The correct answer is "Cost A is fixed, Cost B is Mixed, Cost C is Variable".
Supporting explanations:
The variable cost in amount varies with the changes in the production units but the variable cost per unit is always fixed.
Fixed cost in amount is always fixed even the production volume changes but the fixed cost per unit varies with different levels of production.
In the given case, Cost A has fixed cost only because if we multiply the per units with respective units, we will get the same amount.
For example, 16,000 units at $32 per unit will give the $512,000 (16,000*$32) and 64,000 units at $8 per unit will give the same amount of $512,000 (64,000*$8).
Therefore, Cost A is fixed.
Cost B has both variable costs and fixed costs because the cost per unit decreases when the production increases.
Therefore, Cost B is mixed.
Cost C is variable because as per the above explanation, the variable cost per unit is fixed with no relation when the production changes.
Therefore, Cost C is variable.
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