An Accountant May Have Difficulty Classifying Costs as Fixed or Variable

question 18

Multiple Choice

An accountant may have difficulty classifying costs as fixed or variable because:

• A) the decision situation may cause the costs to be fixed in the short term
• B) costs may be affected by more than one cost driver
• C) costs may behave in a nonlinear way
• D) All of these answers are correct.

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Definitions:

Inventory Turnover Ratio

A financial metric that shows how many times a company has sold and replaced its inventory over a certain period of time.

Average Sale Period

estimates the average time it takes for a company to sell its inventory.

Accounts Receivable Turnover

A financial metric that measures how often a company collects its receivables over a time period.

Inventory Turnover

A ratio indicating how many times a company's inventory is sold and replaced over a specific period, helping assess efficiency in managing inventory levels.