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 one of the following statements 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 type of cost that remains the same up to a certain level of activity, after which it jumps to a higher level. In the given scenario, there is no indication that the total cost of electricity service jumps to a higher level after a certain level of usage. Therefore, it is not an example of a step cost. The total cost is a combination of a fixed cost (the $10 base charge) and a variable cost (the $0.08 charge per kwh), making it an example of a mixed cost.

Suppose You Are Charged a $10 Per Month Base Charge