Question

Within the relevant range, a difference between variable costs and fixed costs is: Multiple Choice a. variable costs per unit change directly with activity and fixed costs per unit remain constant. b. variable costs per unit are constant and fixed costs per unit change indirectly with activity.c. both total variable costs and total fixed costs are constant. d. both total variable costs and total fixed costs change with activity.

Answer 1

Answer:

The correct answer is a. variable cost changes with production activity and fixed cost remains constant.

Explanation:

The fixed cost is constant and does not changes with the output level. It remains constant through out the production process. fixed costs are those expenses which are paid independent of activity. So it is not affected by quantity of production.

While on the other hand variable cost is the cost of raw materials and other inputs. So, it changes with the level of production.