Question

Following are five series of costs A through E measured at various volume levels. Identify each series as either fixed, variable, mixed, step-wise, or curvilinear.

Volume (units)	Series A	Series B	Series C	Series D	Series E
0	\(0	\)2,500	\(0	\)1,000	\(5,000
400	\)3,600	3,100	6,000	1,000	5,000
800	\(7,200	3,700	6,600	2,000	5,000
1,200	\)10,800	4,300	7,200	2,000	5,000
1,600	\(14,400	4,900	8,200	3,000	5,000
2,000	\)18,000	5,500	9,600	3,000	5,000
2,400	$21,600	6,100	13,500	4,000	5,000

Short answer

Answer

Series A	Variable cost
Series B	Mixed cost
Series C	Curvilinear cost
Series D	Step-wise cost
Series E	Fixed cost

Step-by-step solution

Definition of Cost Behavior

How cost incurred changes the behavior of cost due to a change in the activity level attained by the business is termed cost behavior.

Classification of cost

Series A: Variable cost

$$\begin{gathered} \mathit{C}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{c}\mathbf{o}\mathbf{s}\mathbf{t}\mathbf{}\mathbf{a}\mathbf{t}\mathbf{}\mathbf{i}\mathbf{n}\mathbf{t}\mathbf{i}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{l}\mathbf{e}\mathbf{v}\mathbf{e}\mathbf{l}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{i}\mathbf{o}\mathbf{n}}{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{u}\mathbf{n}\mathbf{i}\mathbf{t}\mathbf{s}\mathbf{}\mathbf{a}\mathbf{t}\mathbf{}\mathbf{i}\mathbf{n}\mathbf{i}\mathbf{t}\mathbf{i}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{i}\mathbf{o}\mathbf{n}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{3}\mathbf{,}\mathbf{600}}{\mathbf{400}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{9}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t} \end{gathered}$$

$ 9 cost per unit is applied at each level of production of series A. Therefore, series A is a variable cost.

Series B:Mixed cost

Series B costs incur $2,500 even when the production is 0 units, and it is increasing at a steady rate of 1.5 per unit$\left(\frac{3,100-2,500}{400}\right)$, which means that it is a mixture of fixed and variable costs. Therefore, it will be considered a mixed cost.

Series C:Curvilinear cost

It is a curvilinear cost because it does not increase at a constant rate as per the increase in output level.

Series D:Step-wise cost

It is a step-wise cost because the cost increases after a relevant range of the activity. It is increasing after every increase of 800 units in the production.

Series E:Fixed cost

It is a fixed cost because it is the same for all production levels.