Question

The left column lists several cost classifications. The right column presents short definitions of those costs. In the blank space beside each of the numbers in the right column, write the letter of the cost best described by the definition.

A. Total cost	1. This cost is the combined amount of all the other costs.
B. Mixed cost	2. This cost remains constant over a limited range of volume; when it reaches the end of its limited range, it changes by a lump sum and remains at that level until it exceeds another limited range.
C. Variable cost	3. This cost has a component that remains the same overall volume levels and another component that increases in direct proportion to increases in volume.
D. Curvilinear cost	4. This cost increases when volume increases, but the increase is not constant for each unit produced.
E. Step-wise cost	5. This cost remains constant overall volume levels within the productive capacity for the planning period.
F. Fixed cost	6. This cost increases in direct proportion to increases in volume; its amount is constant for each unit produced.

Short answer

Answer

A. Total cost	1. This cost is the combined amount of all the other costs.
B. Mixed cost	3. This cost has a component that remains the same overall volume levels and another component that increases in direct proportion to increases in volume.
C. Variable cost	6. This cost increases in direct proportion to increases in volume; its amount is constant for each unit produced.
D. Curvilinear cost	4. This cost increases when volume increases, but the increase is not constant for each unit produced.
E. Step-wise cost	2. This cost remains constant over a limited range of volume; when it reaches the end of its limited range, it changes by a lump sum and remains at that level until it exceeds another limited range.
F. Fixed cost	5. This cost remains constant at overall volume levels within the productive capacity for the planning period.

Step-by-step solution

Definition of Cost Behavior

How the cost incurred by the business entity will change due to a change in the level of activity attained by the business entity is known as cost behavior.

A. Total Cost

Total cost refers to the aggregate of each cost incurred by the business entity, whether fixed, variable, or mixed.

B. Mixed Cost

Mixed cost is defined as the mixture of both fixed and variable costs. The fixed component does not change with the change in output volume, but the variable portion of the mixed cost increases and decreases as per the output level.

C. Variable Cost

Variable cost increases with the increase in the production level but per unit variable cost remains the same at every production level.

D. Curvilinear Cost

Curvilinear costs increase with the increase in the production of the business entity. Still, such an increase does not occur at a constant level or in proportion to an increase in output level.

Step-Wise Cost

Step-wise cost remains the same up to some output level or within the relevant range of output. It increases as the output goes beyond the relevant range and remains the same until the production crosses the next relevant range of production.

Fixed Cost

This cost remains the same during all production levels up to the business entity's productive capacity.