Question

​60,000 units ​90,000 units Cost A ​$75,000 ​$75,000 Cost B ​$120,000 ​$180,000 Cost C ​$65,000 ​$80,000 Total Costs ​$260,000 ​$335,000 Cost B is a​ _______________ cost.

Answer 1

Answer:

Variable

Explanation:

Given:

At 60,000 units, Cost B is $120,000

At 90,000 units, Cost B is $180,000

Proportional increase in units is 6/9 that is 0.67

Corresponding proportional increase in cost is 12/18 that is 0.67.

It can be seen that cost increases in the same proportion as the units produced. This indicates that this cost is variable. Variable cost refers to the cost that changes with the change in units produced in the same proportion.

Cost A is fixed cost as cost remain same that is $75,000 even when units produced increased from 60,000 to 90,000.