COST ACCOUNTING
COST BEHAVIORS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The following data pertain to activity and utilitiess for two recent years:Year 1 Year 2 Acivity level (units) 8, 000 12, 000 Utilities costs RM12, 000 RM15, 000 Using the high-low method, what is the variable cost per unit for utilities?
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RM1.25/unit
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RM1.50/unit
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RM1.33/unit
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RM0.75/unit
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Explanation:
Detailed explanation-1: -Examples of fixed costs are rent and lease costs, salaries, utility bills, insurance, and loan repayments. Some kinds of taxes, like business licenses, are also fixed costs.
Detailed explanation-2: -Examples of variable costs are sales commissions, direct labor costs, cost of raw materials used in production, and utility costs.
Detailed explanation-3: -Examples of fixed costs include rent, taxes, and insurance. Examples of variable costs include credit card fees, direct labor, and commission.
Detailed explanation-4: -If the activity level increases, then one would expect the variable cost per unit to increase as well. 3. Fixed costs expressed on a per unit basis vary inversely with changes in activity.
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