Multiple Choice
Which of the following is a nonlinear cost related to order size in inventory management?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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A cost that contains both variable and fixed cost elements is a(n) ______ cost.
A
fixed
B
period
C
mixed
D
variable
Verified step by step guidance1
Understand the concept of cost behavior: Costs can be classified into fixed, variable, and mixed costs based on how they behave with changes in activity levels.
Define fixed costs: These are costs that remain constant regardless of the level of activity, such as rent or salaries.
Define variable costs: These are costs that change directly in proportion to the level of activity, such as raw materials or direct labor.
Define mixed costs: These are costs that have both fixed and variable components. For example, a utility bill may have a fixed base charge plus a variable charge based on usage.
Recognize that the correct answer is 'mixed cost' because the problem describes a cost that contains both variable and fixed elements, which aligns with the definition of mixed costs.
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