Because variable costs are assumed to change in constant proportion with changes in the activity level,the graph of the variable costs when plotted against the activity level appears as a circle.

Question

Quizplus · Accepted Answer

The statement is incorrect because the graph of variable costs when plotted against the activity level does not appear as a circle. It appears as a straight line that increases or decreases based on the increase or decrease in the activity level.

Because Variable Costs Are Assumed to Change in Constant Proportion