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Supplier sells company B raw materials at $ 10/unit for the first 500 units, $ 9/unit...

Supplier sells company B raw materials at $ 10/unit for the first 500 units, $ 9/unit for the second 500 units and at $8.5/unit for more than 1000 units.

Which type of cost behavior you have in this case? Explain with graphical representation.

Can you help me please with the graphical representation of this cost behavior? It should be a piecewise linear cost behavior as we have learned.

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Answer #1

piecewise linear cost behavior:

Because variable cost per unit are constant at $10 per unit for a range of activity of 500 units

Variable cost per unit are again constant at $9 per unit for a range of activity of next 500 units

And it again remains constant at $8.5 for range of activity of above 1000 units.

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