COST ACCOUNTING
COST TERMINOLOGY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Cost of direct materials consumed in production
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Salary of production operators paid in unitary basis
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Depreciation on factory machinery
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Production royalties incurred in production
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Detailed explanation-1: -Depreciation is a fixed cost, because it recurs in the same amount per period throughout the useful life of an asset.
Detailed explanation-2: -Answer and Explanation: a. Depreciation expense on a factory building is a fixed cost.
Detailed explanation-3: -Depreciation is a fixed cost using most of the depreciation methods, since the amount is set each year, regardless of whether the business’ activity levels change. The exception is the units of production method.
Detailed explanation-4: -Cost of machinery and equipment: If the equipment is intended for long-term use, this type of asset would be considered a fixed cost.
Detailed explanation-5: -Fixed costs can include property taxes, rent, salaries and the cost of benefits for non-sales and management personnel. They are one of three types of costs incurred by most businesses.