In Describing the Cost Formula Equation, Y = a

question 123

Multiple Choice

In describing the cost formula equation, Y = a + bX, which of the following is correct:

• A) "Y" is the independent variable.
• B) "a" is the variable cost per unit.
• C) "a" and "b" are valid for all levels of activity.
• D) in the high-low method, "b" equals the change in cost divided by the change in activity.

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Definitions:

Gross Profit

The difference between revenue and the cost of making a product or providing a service, before deducting overheads, payroll, taxation, and interest payments.

Inventory Costing Method

A method used to assign costs to inventory, affecting how costs are reported in the financial statements.

Year-End Purchase

Acquisitions or purchases made by a company close to the end of its fiscal year, often impacting the annual financial statements.

LIFO Cost of Goods Sold

An inventory costing method where the last items placed in inventory are considered the first ones sold, affecting the cost of goods sold during a period.