Variable and Fixed Costs – True or False

Practice Question

Intro to Managerial Accounting
Managerial Cost Concepts & Cost Behaviour Analysis
Variable and Fixed Costs
True or False

Fixed costs are costs that vary in total with changes in the activity level.

Answer +
Correct Answer: FALSE
Explanation +

Fixed costs remain constant in total regardless of changes in the activity level within the relevant range. Understanding the behavior of fixed and variable costs is critical for budgeting and forecasting.