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Cost of Capital

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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

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Answer explains an important concept of COST OF CAPITAL and helps in understanding the concept by answering a question.

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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 ...

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