COST ACCOUNTING
COST BEHAVIORS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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vary in total directly and proportionately with changes in the activity level.
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remain the same per unit at every activity level.
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remain in total directly and proportionately with changes in the activity level.
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Detailed explanation-1: -Explanation: Variable cost refers to the cost that changes with the production level but the per unit variable cost does not change as per the production and remains the same. Simply, variable cost does not change and the per unit cost remains at each level of production.
Detailed explanation-2: -Variable costs vary in a linear fashion with the production level. However, when stated on a per unit basis, variable costs remain constant across all production levels within the relevant range.
Detailed explanation-3: -Fixed costs are costs that remain the same in total regardless of changes in the activity level.
Detailed explanation-4: -Variable cost: A variable cost remains constant on a per unit basis, but changes in total in direct relation to changes in volume. Fixed cost: A fixed cost remains constant in total amount, but changes, if expressed on a per unit basis, inversely with changes in volume.
Detailed explanation-5: -Variable costs have two main characteristics: (a) The total cost varies in proportion to changes in the level of activity (b) The cost per unit remains constant, regardless of the activity level.