Kocher Steel typically achieves one of three production levels in any given year: 8 million pounds of steel, 10 million pounds of steel, or 16 million pounds of steel. In tracking some of its costs, Kocher Steel's controller discovered one cost that was $10 per pound at a production level of 8 million pounds, $8 per pound at a production level of 10 million pounds, and $5 per pound at a production level of 16 million pounds. This is an example of a ________.
a) variable cost
b) fixed cost
c) semivariable cost
d) semifixed cost
e) sunk cost
Answer: a) Variable cost
Given information about steel production levels:
$10 per pound at production level of 8 million pounds
$8 per pound at a production level ...
Answer explains an important concept of COST OF CAPITAL and helps in understanding the concept by answering a question.