When the Seller Takes on Part or All of the Cost

question 112

Multiple Choice

When the seller takes on part or all of the cost of shipping, it is called ________.

• A) freight absorption
• B) F.O.B. factory
• C) F.O.B. origin
• D) uniform delivered
• E) two-part pricing

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Definitions:

Variable Costs

Disbursements that are contingent upon the magnitude of production or sales transactions.

Contribution Margin

The amount by which the sale of a product or service exceeds its variable costs, contributing to covering fixed costs and generating profit.

Variable Cost

A cost that varies directly with the level of production or sales volume.

High-low Method

A method applied in cost accounting that calculates fixed and variable expenses by analyzing the maximum and minimum activity levels.