Mathematics · Cost Accounting
Consider a graph representing total annual cost against activity level. Which of the following scenarios best describes a cost behavior represented by a line that starts from the origin, rises at a constant slope, and then bends to rise at a gentler (flatter) slope after a certain activity level?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Annual total cost of telephone services where the supplier makes a fixed charge and then a constant unit rate for calls up to a certain level, then all calls above that are free.
- 2Total annual direct material cost where the supplier charges a constant amount per unit which then reduces to a lower amount per unit only for the additional units purchased after a certain level.✓
- 3Annual total cost of factory power where the supplier sets a tariff based on a fixed charge plus a constant unit cost which is subject to a maximum annual charge.
- 4Total annual direct material cost where the supplier charges a constant amount per unit, but when purchases exceed a certain level, a lower amount per unit applies to all purchases in the year.
Correct answer
Total annual direct material cost where the supplier charges a constant amount per unit which then reduces to a lower amount per unit only for the additional units purchased after a certain level.
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