Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis, which of the following costs would be represented by a line that starts at the origin and reaches a maximum value and beyond this point the line becomes parallel to the horizontal axis?
A) total direct material costs
B) a consultant paid £100 per hour with a maximum fee of £2,000
C) employees who are paid £15 per hour and guaranteed a minimum weekly wage of £300
D) rent on exhibit space at a convention

Question

Quizplus · Accepted Answer

This scenario describes a situation where costs increase with activity (hours of consultancy) up to a certain point (the maximum fee of £2,000), after which additional activity does not increase the cost. This is characteristic of a consultant paid by the hour up to a maximum fee, as described in option B.

Assuming Costs Are Represented on the Vertical Axis and Volume