A cost that has both a fixed and variable component is called a(n):
A) step cost.
B) mixed cost.
C) irrelevant cost.
D) relevant cost.

Question

Quizplus · Accepted Answer

A mixed cost has both fixed and variable components. Option A, step cost, refers to a cost that remains constant within a certain range of activity or capacity, but it will increase or decrease once a threshold has been reached. Option C, irrelevant cost, is a cost that does not change with the level of activity and therefore does not need to be taken into consideration in decision making. Option D, relevant cost, refers to a cost that will be affected by the decision made and therefore needs to be considered in decision making.

A Cost That Has Both a Fixed and Variable Component