Taylor Corporation is determining the cost behavior of several items in order to budget for the upcoming year. Past trends have indicated the following dollars were spent at three different levels of output.
In establishing a budget for 14,000 units, Taylor should treat Costs A, B, and C, respectively, as:
A) Semivariable, fixed, and variable.
B) Variable, fixed, and variable.
C) Semivariable, semivariable, and semivariable.
D) Variable, semivariable, and semivariable.

Question

Taylor Corporation is determining the cost behavior of several items in order to budget for the upcoming year. Past trends have indicated the following dollars were spent at three different levels of output.
 In establishing a budget for 14,000 units, Taylor should treat Costs A, B, and C, respectively, as:
A) Semivariable, fixed, and variable. 
B) Variable, fixed, and variable. 
C) Semivariable, semivariable, and semivariable. 
D) Variable, semivariable, and semivariable.

Quizplus · Accepted Answer

Cost A appears to be semivariable or mixed as it varies between quantities but does not vary consistently so a portion must be fixed and a portion variable. Cost B is fixed in the relevant range (14,000 units) and Cost C varies consistently for all quantities and therefore must be variable.

Taylor Corporation Is Determining the Cost Behavior of Several Items