A Level Accounting (9706)•9706/13/O/N/23
Explanation
Cost type determined by constant total cost despite varying output
Steps:
- Calculate total cost at 6000 units: 6000 × 18,000.
- Calculate total cost at 9000 units: 9000 × 18,000.
- Observe total cost remains $18,000 in both cases.
- Conclude cost is fixed since total does not change with production volume.
Why A is correct:
- Fixed costs stay constant in total amount regardless of units produced, so per-unit cost decreases as output rises (definition of fixed costs).
Why the others are wrong:
- B: Semi-variable costs have both fixed and variable elements, so total cost wouldn't stay exactly constant.
- C: Step-variable costs change in discrete steps, not remaining flat across levels.
- D: Variable costs change proportionally with output, so total cost would increase from 27,000 here.
Final answer: A
Topic: Costs and cost behaviour
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