Definition of costs: Step-wise Cost: A Step-wise cost is a cost that does not change steadily with the changes in activity volume. It changes at some point of time. It remains fixed within some volume range and then changes suddenly after a certain point and again remains fixed within that next volume range and again suddenly changes after next volume range, and so on. Variable Cost: A variable cost is the cost that changes at each level and volume of activity changes. It never remains fixed in totality. It increases as the level of output increases and vice versa. It remains fixed per unit of output. Fixed Cost: A Fixed cost is a cost which remains same in totality with the change in activity level. It never remains fixed per unit. Mixed Cost: Mixed cost is a cost which contains both fixed and variable cost components. Curvilinear Cost: Curvilinear cost is a cost that increases at inconsistent rate i.e. irregular cost that increases at different different rates as the level of activity increases. To determine: 1) Which graph represents above mentioned cost behavior 2) Identify which graph represents the most suitable cost behavior given in various instances mentioned in question.

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Chapter 21, Problem 1E

To determine

Definition of costs:

Step-wise Cost: A Step-wise cost is a cost that does not change steadily with the changes in activity volume. It changes at some point of time. It remains fixed within some volume range and then changes suddenly after a certain point and again remains fixed within that next volume range and again suddenly changes after next volume range, and so on.

Variable Cost: A variable cost is the cost that changes at each level and volume of activity changes. It never remains fixed in totality. It increases as the level of output increases and vice versa. It remains fixed per unit of output.

Fixed Cost: A Fixed cost is a cost which remains same in totality with the change in activity level. It never remains fixed per unit.

Mixed Cost: Mixed cost is a cost which contains both fixed and variable cost components.

Curvilinear Cost: Curvilinear cost is a cost that increases at inconsistent rate i.e. irregular cost that increases at different different rates as the level of activity increases.

To determine:

1) Which graph represents above mentioned cost behavior

2) Identify which graph represents the most suitable cost behavior given in various instances mentioned in question.

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