Which of the following costs does not change in total when the activity level increases or...

Which of the following costs does not change in total when the activity level increases or decreases within the relevant range?

		mixed costs
		fixed cost
		variable costs
		relevant costs
		None of the answer choices is correct.

Expert Solution

Answer)

The correct option in the given question is: FIXED COST

Justification:

· Mixed Costs: Mixed costs are the costs that have a fixed component and a variable component. The fixed component remains same in total irrespective of the level of activity and the variable costs change with the level of activity (Example, the cost of operating an Automobile has a fixed components like insurance, depreciation and variable components like cost of fuel, Tires, Oil, etc.).

· Fixed Costs: These are the costs that remains same in total irrespective of the level of activity (Example – Rent of factory premises).

· Variable costs: These are the costs that remains same per unit. However, it change in proportion to the level of activity (Example direct material cost)

· Relevant costs: These are the those future costs that are different under each alternative course of action and thus they vary in total with a change in the level of activity (Example Direct Material costs, Direct Labor costs, variable manufacturing overheads).

ekkarill92 answered 2 years ago

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