In CVP analysis, managers usually assume that the cost function is linear. Which of the following equations best represents a linear function for total cost if the cost is a mixed cost?
A) y = $200 + $60x
B) y = $60x2
C) y = $60x
D) y = $200

Question

Quizplus · Accepted Answer

A mixed cost has both fixed and variable components. The linear function for total cost should include both fixed and variable components. Option A includes a fixed cost component of $200 and a variable cost component of $60x, where x is the amount of the cost driver (units produced, labor hours, etc.). Therefore, option A best represents a linear function for total cost if the cost is a mixed cost. Option B only includes a variable cost component, so it does not represent a mixed cost. Option C is also only a variable cost function without any fixed cost component. Option D includes only a fixed cost component and no variable cost component, so it also does not represent a mixed cost.

In CVP Analysis, Managers Usually Assume That the Cost Function