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CMA Intermediate · Cost Accounting · Introduction to Cost Accounting

In a cost accounting system, a cost that remains the same in total when the volume of activity changes within the relevant range, but varies per unit inversely with volume, is called:

The cost is a fixed cost. Within the relevant range its total amount does not change with activity, so the cost per unit falls as volume rises and rises as volume falls. Variable costs behave the opposite way, staying constant per unit.

  1. AVariable cost
  2. BFixed costCorrect
  3. CSemi-variable cost
  4. DStep-variable cost

Explanation

A fixed cost stays constant in total within the relevant range, so the cost per unit falls as output rises. A variable cost is constant per unit but changes in total, so it is the opposite pattern.

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