Total Cost = Fixed Cost + (Variable Rate × Output)

question 9

Multiple Choice

Total cost = Fixed cost + (Variable Rate × Output) In the cost formula above which element would be the dependent variable?

• A) variable rate
• B) fixed cost
• C) total cost
• D) output

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Definitions:

Activity-based Costing

A pricing strategy that allocates expenses to goods or services according to the tasks they necessitate, striving for a more accurate distribution of costs.

Relevant Cost

A cost that should be considered when making decisions.

Avoidable Costs

Costs that can be eliminated if a particular decision is made, such as discontinuing a product line.

Irrelevant Costs

Costs that will not be affected by a decision and therefore should not be considered when making that decision.