Chapter 2 Chapter 2 Classification of Costs (by variability)

Question 1

Variable Cost

Answer 1

cost that change directly in proportion to changes in activity (volume)

Question 2

Fixed Costs

Answer 2

cost that remain unchanged for a given time period regardless of change in activity (volume)

Question 3

Examples of Fixed Costs

Answer 3

Rent, insurance on property, maintenance, repairs of buildings, and depreciation of factory equipment are examples of fixed costs

Question 4

Examples of Variable costs

Answer 4

Direct Labor and Direct materials