Using the Account Classification Method, Estimating the Change in Variable

question 1

Multiple Choice

Using the account classification method, estimating the change in variable costs involve three steps.Which of the following is correct?

• A)I.Sum the costs classified as fixed to obtain the total fixed costs for the most recent period. II.Multiply the amount in (I) by the volume of activity for the corresponding period to estimate the unit fixed cost.
• III)Divide (2) by the change in activity to estimate the total controllable cost.
• B)I.Sum the costs classified as fixed to obtain the total fixed costs for the most recent period. II.Divide the amount in (I) by the volume of activity for the corresponding period to estimate the unit fixed cost.
• III)Multiply (2) by the change in activity to estimate the total controllable cost.
• C)I.Sum the costs classified as variable to obtain the total variable costs for the most recent period. II.Multiply the amount in (I) by the volume of activity for the corresponding period to estimate the unit variable cost.
• III)Divide (2) by the change in activity to estimate the total controllable cost.
• D)I.Sum the costs classified as variable to obtain the total variable costs for the most recent period. II.Divide the amount in (I) by the volume of activity for the corresponding period to estimate the unit variable cost.
• III)Multiply (2) by the change in activity to estimate the total controllable cost.

---

Definitions:

Stock Dividend

A dividend payment made in the form of additional shares rather than a cash payout, representing a reinvestment of a company’s earnings.

Market Value

The current price at which an asset or service can be bought or sold in a marketplace.

Treasury Stock

Stocks that the company originally sold and then bought back, decreasing the number of shares available for trade in the public market.

Cash Dividend

A distribution of earnings made by a company to its shareholders, typically in the form of profits.