Question

If a mixed cost has its level of activity increase within the relevant range:________.
A) Total cost will increase and fixed cost per unit will decrease as activity level increases
B) Variable cost per unit and total fixed costs also increase as activity level increases
C) Fixed cost per unit and total variable cost also increase as activity level increases
D) Fixed cost per unit will increase and variable cost per unit will remain constant as activity level increases
E) Variable cost per unit and total cost also increase as activity level increases

Answer 1

Answer:

If a mixed cost has its level of activity increase within the relevant range:E) Variable cost per unit and total cost also increase as activity level increases

Explanation:

A Mixed Cost or a Semi- Variable Cost has a Fixed Cost Component and a Variable Cost Component.

When the level of activity increase within the relevant range the following happen :

1. The Fixed Cost Component Remain the same since the increase is within relevant range.
2. Variable Cos Component increase in direct proportionate with the level of activity.
3. Ultimately the total Cost increase due to increase in Variable Cost Component.

Answer 2

Answer:

E) Variable cost per unit and total cost also increase as activity level increases.

Explanation:

Mixed cost, also known as semi variable cost, is a cost that contains some elements of fixed cost and some elements of variable cost. Total cost is the sum of fixed and variable cost. Fixed cost is a type of cost that is constant which means it does not vary depending on the level of activity whereas variable cost is a type of cost that varies according to different activity level.

When there is an increase in mixed cost, variable cost increases because in mixed cost, at level zero of activity, it is fixed and at varying figures subsequent to activity levels, it is variable. Total cost also increases as mixed cost increases as well.