A Direct Relationship Occurs When

question 253

Multiple Choice

A direct relationship occurs when

• A) the two variables being compared change in opposite directions, or when one goes up the other goes down.
• B) a change in one of the variables causes a change in the other variable in any direction.
• C) the two variables being compared change in the same direction, or when one goes up the other also goes up.
• D) the two variables have no identifiable relationship with each other.

---

Definitions:

Common Fixed Expense

Costs that do not change with the level of production or sales within a certain range, and are shared across multiple departments or products.

Variable Costing

A costing method that includes only variable manufacturing costs - direct materials, direct labor, and variable manufacturing overhead - in the cost of goods sold.

Absorption Costing

In this method of accounting, the price of manufacturing a product is calculated by summing the costs of direct materials, direct labor, and all manufacturing overheads, variable and fixed alike.

Fixed Manufacturing Overhead

The total of all costs related to manufacturing that do not change with the level of production, such as salaries of managers and rent of the factory.