COST ACCOUNTING
COST BEHAVIORS
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Direct material
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Direct labor
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Factory rental
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Sales commission
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Detailed explanation-1: -Answer and Explanation: Rent on a factory building is a fixed cost. Rent on a factory building is a fixed cost because the rent has to be paid even if the goods or services are not produced in the factory.
Detailed explanation-2: -Key Takeaways Variable costs may include labor, commissions, and raw materials. Fixed costs remain the same regardless of production output. Fixed costs may include lease and rental payments, insurance, and interest payments.
Detailed explanation-3: -Variable costs are costs that change as the volume changes. Examples of variable costs are raw materials, piece-rate labor, production supplies, commissions, delivery costs, packaging supplies, and credit card fees.
Detailed explanation-4: -Raw materials, manufacturing, labour and amortization are examples of variable costs. Variable costs appear under cost of goods sold or cost of sales on a company’s income statement. It is important for business owners to understand the dynamics of these costs so they can stay competitive.