Which Statement Is Correct About Expenses on the Statement of Income

question 24

Multiple Choice

Which statement is correct about expenses on the statement of income?

• A)Classifying expenses by nature means that expenses are reported according to the activity for which they are incurred.
• B)Examples of expenses classified by function are cost of goods sold and administrative expenses.
• C)Expenses must be classified by their function.
• D)Expenses must be classified in decreasing order of magnitude.

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Definitions:

AC

Typically refers to "air conditioning," a system for controlling the humidity, ventilation, and temperature in a building or vehicle.

Average Fixed Costs

The cost incurred by a company that does not change with the level of goods or services produced, averaged over a period.

Units

refers to a single, quantified piece of something that is used for measurement or as a standard for exchange.

Average Variable Costs

The total variable costs (e.g., labor, materials) divided by the quantity of output produced, showing the variable cost per unit of output.