Parker Corporation observed that when 25,000 units were sold, a particular cost amounted to $75,000, or $3.00 per unit. When volume increased by 10%, the cost totaled $82,500 (i.e., $3.00 per unit). The cost that Parker is studying can best be described as a:
A) variable cost.
B) fixed cost.
C) semivariable cost.
D) discretionary fixed cost.
E) step-fixed cost.

Question

Quizplus · Accepted Answer

The cost per unit remains constant at $3.00 even when the volume increases by 10%, indicating that the cost is a variable cost, which changes in total in direct proportion to changes in the volume of activity.

Parker Corporation Observed That When 25,000 Units Were Sold, a Particular