Based on the following cost data, what conclusions can you make about the costs of Product A and Product B?

Total Cost

Production: Product A Product B

10 units $100?

100 units $1,000?

1,000 units $10,000?

Unit Cost

Production: Product A Product B

10 units? $10,000

100 units? $1,000

1,000 units? $100

a. Product A and Product B are both variable costs.

b. Product A and Product B are both mixed costs.

c. Product A is a fixed cost and Product B is a variable cost.

d. Product A is a variable cost and Product B is a fixed cost.

Question

Business

Higgins

28 May, 20:15

Based on the following cost data, what conclusions can you make about the costs of Product A and Product B?

Total Cost

Production: Product A Product B

10 units $100?

100 units $1,000?

1,000 units $10,000?

Unit Cost

Production: Product A Product B

10 units? $10,000

100 units? $1,000

1,000 units? $100

a. Product A and Product B are both variable costs.

b. Product A and Product B are both mixed costs.

c. Product A is a fixed cost and Product B is a variable cost.

d. Product A is a variable cost and Product B is a fixed cost.

+4

Answers (1)

Know the Answer?

David Sexton · Answer 1

The answer is D

Explanation:

Product A is a variable cost because variable cost (inputs) increases (decreases) with increase (decrease) units (output).

Whereas for product B;

Though, fixed cost is fixed across all units of output but as the total output increases, the average fixed cost decreases because the same amount of fixed costs now cover a larger number of output produced.