Match Cost Types to Examples
What are the definitions of Fixed, Variable, and Mixed costs? How can we categorize each cost type?
Understanding Cost Types
Variable Costs: Variable costs fluctuate with the output level. Raw materials are an example of variable costs.
Mixed Costs: Mixed costs consist of both fixed and variable components. Utility bills with a fixed base charge and variable usage charge are an example of mixed costs.
To categorize each cost type, we need actual examples based on their behavior in relation to output level.
What cost type would the example provided fall under? Why?
Identifying the Cost Type
The cost type for the example given would be Variable. The cost associated with writing answers as a professional writer can vary depending on factors such as question complexity, research time, and writer's rate.
Since the cost is not fixed and changes based on variables, it falls under the category of variable costs. The more answers written, the higher the variable cost incurred.