A Company Incurs a Cost That Is Directly Proportional to the Magnitude

question 36

Multiple Choice

A company incurs a cost that is directly proportional to the magnitude of the decision variable.This is an example of a:

• A)fixed charge
• B)sunk cost
• C)variable cost
• D)marginal cost
• E)inventory cost

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Definitions:

Debit Balance

An accounting entry that represents a situation where debits are greater than credits in an account, often indicating assets or expenses.

Allowance for Doubtful Accounts

A contra-asset account that reduces the total receivables balance to reflect accounts that may not be collectible.

Analysis of Receivables Method

An accounting method used to estimate the amount of receivables that will not be collected based on historical data and trends.

Direct Write-off Method

An accounting practice where uncollectible accounts receivable are written off to expense only when they are determined to be non-recoverable.