A Direct Cost Can Be

question 11

Multiple Choice

A direct cost can be:

• A)Only fixed.
• B)Only variable (unit-level).
• C)Either fixed or variable (unit-level).
• D)Neither fixed nor variable (unit-level).

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Definitions:

Net Operating Income

The profit generated from a business's operations after subtracting operating expenses, but before interest and taxes.

Degree Of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to a change in its sales volume.

Variable Expenses

Expenses that change in proportion to the activity of a business, such as raw material costs or sales commissions.

Fixed Expenses

Expenses that remain constant regardless of production or sales volume, including rent, insurance, and salaries.