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2. The following total cost graphs indicate which type of cost behavior? A. VARIABLE COST B. FIXED COST C. MIXED COST D. STEP COST I

2. The following total cost graphs indicate which type of cost behavior? A. VARIABLE COST B. FIXED COST C. MIXED COST D. STEP COST I

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Title: Understanding Cost Behavior through Graphs --- **Question:** The following total cost graphs indicate which type of cost behavior? **Options:** A. Variable Cost B. Fixed Cost C. Mixed Cost D. Step Cost **Explanation of Diagrams:** The image contains two graphs illustrating different types of cost behaviors. - **Graph on the Left**: - The plot starts at a low point on the vertical axis and shows a line that gradually increases. There are fluctuations, but the general trend is an upward slope, which may indicate increasing variable costs. - **Graph on the Right**: - This graph also begins at a low point and shows a consistent increase, with a line that slightly fluctuates. It appears to demonstrate costs that vary with production levels, combining fixed and variable elements, which may represent a mixed cost structure. Each graph reflects how total costs behave concerning changes in activity level, helping to identify whether the costs are variable, fixed, mixed, or step. --- **Note:** Consider the nature of cost behavior when interpreting the graphs to choose the correct answer from the options provided.
Transcribed Image Text:Title: Understanding Cost Behavior through Graphs --- **Question:** The following total cost graphs indicate which type of cost behavior? **Options:** A. Variable Cost B. Fixed Cost C. Mixed Cost D. Step Cost **Explanation of Diagrams:** The image contains two graphs illustrating different types of cost behaviors. - **Graph on the Left**: - The plot starts at a low point on the vertical axis and shows a line that gradually increases. There are fluctuations, but the general trend is an upward slope, which may indicate increasing variable costs. - **Graph on the Right**: - This graph also begins at a low point and shows a consistent increase, with a line that slightly fluctuates. It appears to demonstrate costs that vary with production levels, combining fixed and variable elements, which may represent a mixed cost structure. Each graph reflects how total costs behave concerning changes in activity level, helping to identify whether the costs are variable, fixed, mixed, or step. --- **Note:** Consider the nature of cost behavior when interpreting the graphs to choose the correct answer from the options provided.
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