Chapter 21, Problem 1QS

Cost behavior identification
C1
Listed here are four series of separate costs measured at various volume levels. Examine each series and identify whether it is best described as a fixed, variable, step-wise, or curvilinear cost. (It can help to graph each cost series.)

Volume (Units)	Series 1	Series 2	Series 3	Series 4
0	1 0	1150	$ 900	$100
100	... 800 1.500	150 150	800 8OO	105
200	120
300	. 2,400	150	1,600	145
100..	3,200	150	1.500	190
500	4.000	150	2.400	250
600	4.800	150	2.400	320

To determine

Variable Cost:

The cost which changes with the change in level of activity is called a variable cost.

Fixed Cost:

Fixed Cost is rigid in nature and does not change according to the change in the level of activity.

Step-Wise Costs:

Step-wise costs do not changes within a range of level of activity, and changes in lump sum when the level of activity goes beyond the range.

Curvilinear cost:

The costs which increases or decreases in an inconsistent or irregular manner are called curvilinear cost.

Identifying each series as fixed, variable, step-wise, or curvilinear cost

Answer to Problem 1QS

Solution:

Series	Type of Cost
Series 1	Variable Cost
Series 2	Fixed Cost
Series 3	Step-wise Cost
Series 4	Curvilinear Cost

Explanation of Solution

Series 1 is a variable cost because it increases in consistent manner according to the increase in volume.
Series 2 is fixed cost because the $450 is fixed for the all level of sales volume.
Series 3 is Step-wise cost as it increases in lump sum and does not increase within the range.
Series 4 is curvilinear cost because it increases in a very irregular manner.

Conclusion

Hence is concluded that according to the explanation provided, the series 1 is variable cost, series 2 is fixed cost, series 3 is step-wise cost and series 4 is curvilinear cost.