Which of the following statement regarding cost is correct:

Question

BlackTom AI · Accepted Answer

The question asks which statement about cost is correct when activity level changes. 
Option a: 'If activity changes then total fixed cost remains constant but cost per activity changes' is true. In absorption/variable costing, total fixed cost does not vary with activity, so it stays constant, while the fixed cost per unit of activity changes as activity increases or decreases (since total fixed cost divided by more or fewer activity units yields a different per-unit amount). This captures the classic fixed cost behavior correctly.
Option b: 'If activity changes then total fixed cost and cost per activity remain constant' is incorrect because although total fixed cost stays the same, the fixed cost per unit (cost per activity) does change with activity level, so the statement is false.
Option c: 'If activity changes then total fixed and variable cost will change' is misleading. Total fixed cost does not change with activity, so this option incorrectly asserts a change in total fixed cost; variable costs do change with activity, but the statement as a whole is not accurate.
Option d: 'If activity changes then total variable cost and cost per activity will change' is partly true (total variable cost does change with activity), but it omits that total fixed cost remains unchanged; since the option is framed as a universal cost statement, it is not the correct comprehensive description of cost behavior when activity changes.
In summary, option a correctly describes that fixed costs stay constant in total, while the per-unit cost (cost per activity) varies with the level of activity, which aligns with standard cost behavior concepts.

MCD2150 - T3 - 2025 Week 10 Workshop 1 Quiz

Which of the following statement regarding cost is correct:

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