Suppose you are charged a $10 per month base charge for your electrical service.You are also charged an additional $0.08 for every kwh of electricity you use.Which of the following statement is not true?
A)The $10 base charge is a fixed cost.
B)The $0.08 charge per kwh is a variable cost.
C)The total cost is an example of a step cost.
D)The total cost is an example of a mixed cost.

Question

Quizplus · Accepted Answer

A step cost is a cost that increases in steps as activity levels increase, but remains constant within each step. However, this electric service cost is not a step cost because the increase in cost is continuous and not in steps, as the cost per kwh increases as the amount of electricity used increases. The total cost is a mixed cost because it includes both a fixed (base charge) and variable cost (charge per kwh).

Suppose You Are Charged a $10 Per Month Base Charge