Select the Appropriate Classification for Each of the Costs Incurred

question 3

Multiple Choice

Select the appropriate classification for each of the costs incurred by a manufacturer of automobiles.
-cost of tires

• A)direct materials
• B)direct labor
• C)overhead
• D)selling expense
• E)administrative expense

Understand the concept and application of flexible budgets in identifying variances.

Calculate spending variances for different categories of costs.

Apply flexible budget formulas to determine expected costs based on planned activity levels.

Interpret the impact of activity level changes on budgeted costs.

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Definitions:

Durable Goods

Consumer products that have a long life span (over three years) and are used over time, such as cars, appliances, and furniture.

Food Producers

Food Producers are companies or individuals engaged in the cultivation, preservation, and distribution of food products and commodities to consumers.

Defensive Industries

Sectors of the economy expected to remain stable during various phases of the business cycle, often including utilities and consumer staples.

Pharmaceutical Firms

Companies involved in the research, development, production, and marketing of drugs and other healthcare products.