COST ACCOUNTING
COST BEHAVIORS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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costs that remain the same in total regardless of changes in the activity level
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costs that contain both a variable costs and fixed cost element
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costs that vary in total directly and proportionately with changes in the activity level
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Detailed explanation-1: -Indirect labor is variable cost because it increases in total directly and proportionately with the changes in the activity level.
Detailed explanation-2: -What Is a Variable Cost? A variable cost is a corporate expense that changes in proportion to how much a company produces or sells. Variable costs increase or decrease depending on a company’s production or sales volume-they rise as production increases and fall as production decreases.
Detailed explanation-3: -Variable costs are directly proportional to the level of production. If zero output is being produced then these costs do not have to be incurred.
Detailed explanation-4: -Variable costs have two main characteristics: (a) The total cost varies in proportion to changes in the level of activity (b) The cost per unit remains constant, regardless of the activity level.
Detailed explanation-5: -Variable costs: A variable cost increases or decreases as volume of activity increases or decreases. On a per unit basis, a variable cost per unit remains constant but the total amount of variable cost changes with the level of production.