Question

Which of the following defines variable cost behavior when activity increases within its relevant range?

Select one:

a.

Total cost reaction to increase in activity	Cost per unit reaction to increase in activity
increases	remains constant

b.

Total cost reaction to increase in activity	Cost per unit reaction to increase in activity
remains constant	remains constant

c.

Total cost reaction to increase in activity	Cost per unit reaction to increase in activity
remains constant	increases

d.

d.

Total cost reaction to increase in activity	Cost per unit reaction to increase in activity
increases	increases

Answer 1

Question 1:-

The correct answer for the question is Option A - Total Cost reaction to increase in activity - Increases & Cost per unit reaction to increase in activity - Remains Constant. As the activity increases within the relevant range, the variable cost per unit remains the same , however , since there is an increase in activity, the total cost increases.

Option B is incorrect as the total cost increases and does not remain constant when the activity level increases

Option C is incorrect as the cost per unit does not increase within a relevant range. Rather it remains the same. Hence, this option is incorrect.

Option D is incorrect as cost per unit does not increase within a relevant range. Rather it remains the same. Hence, this option is incorrect.

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