Question

Which of the following costs are, in total, constant within the relevant range while the level of the associated driver varies?

a. Fixed cost
b. Variable cost
c. Opportunity cost
d. Step-up cost

Answer 1

Fixed costs are constant within the relevant range while the level of the associated driver varies. Variable costs vary in direct proportion to the level of production or sales.

Step-by-step explanation:

In terms of costs, fixed costs are constant within the relevant range while the level of the associated driver varies. Fixed costs are expenses that do not change with the level of production or sales.

For example, the rent for a factory remains the same regardless of how much the company produces or sells.

Variable costs, on the other hand, vary in direct proportion to the level of production or sales.

For example, the cost of raw materials used in manufacturing a product increases as more units are produced.