Question

Choose the correct description of variable and fixed costs. A. A variable cost is related to a particular cost object and can be traced to it in an economically feasible​ way, such as the cost of steel in the manufacturing of a luxury car. A fixed cost is related to a particular cost object but cannot be traced to it in an economically feasible​ way, such as the salary of a plant manager who oversees production of many different types of luxury cars produced at the same plant. B. A variable cost is considered to be a unit​ cost, such as the​ per-attendee-cost of hiring a musical group to perform at an event. A fixed cost is considered to be a total​ cost, such as the total fee paid to the musical group for performing at the event. C. A variable cost changes in total in proportion to changes in the related level of total activity or​ volume, such as a sales commission that is a percentage of each sales revenue dollar. A fixed cost remains unchanged in total for a given time​ period, despite wide changes in the related level of total activity or​ volume, such as a fixed annual leasing cost of a machine. D. All of the above.

Answer 1

Answer:

B.

Explanation:

Fixed costs are those costs which are not output dependent. Are fixed till certain level of output. The fixed cost per unit changes with output.

Variable costs are those costs which are output dependent. There is a positive correlation between the production output and the variable cost. The variable cost per unit remains constant.

With the classification of cost into fixed and variable, the manager can count the break even point, in amount terms as well as in the number of unit terms.

The ratio between the variable cost and fixed cost shows how much adjustable is the organization.