ECONOMICS

COST ACCOUNTING

INFORMATION FOR DECISION MAKING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
What type of costs is include costs for materials?
A
Variable costs
B
Fixed costs
Explanation: 

Detailed explanation-1: -Examples of variable costs include raw materials, labor, utilities, commission, or distribution costs.

Detailed explanation-2: -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. In some accounting statements, the Variable costs of production are called the “Cost of Goods Sold.”

Detailed explanation-3: -Variable cost FAQ Examples of variable costs include raw materials, sales commissions, packaging and shipping, manufacturing labor, and credit card fees.

Detailed explanation-4: -Raw materials are categorized as direct expenses on a company’s income statement because they contribute directly to the making of a product or delivery of a service. As raw material costs change along with production volumes, they are considered to be variable costs.

Detailed explanation-5: -Wages are variable costs in a firm, as the number of employees required will vary based on the demand for production, therefore the wages paid to the total number of employees will vary with the number of employees.

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