Which of the following is the correct equation for total mixed costs under the linearity assumption?
A)Total Fixed Costs + (Variable Cost per Unit × Units of Activity)
B)Total Variable Costs + (Fixed Cost per Unit × Units of Activity)
C)(Total Fixed Costs × Units of Activity)+ Total Variable Costs
D)(Total Fixed Costs × Units of Activity)+ (Total Variable Costs × Units of Activity)

Question

Quizplus · Accepted Answer

Under the linearity assumption, mixed costs can be represented by the equation y = a + bx, where y is the total mixed cost, a is the total fixed cost, b is the variable cost per unit of activity, and x is the level of activity. Rearranging this equation gives us y = Total Fixed Costs + (Variable Cost per Unit × Units of Activity), which is choice A.

Which of the Following Is the Correct Equation for Total