Classifying a Cost as Either Direct or Indirect Depends Upon

question 47

Multiple Choice

Classifying a cost as either direct or indirect depends upon ________.

• A) the behavior of the cost in response to volume changes
• B) whether the cost is expensed in the period in which it is incurred
• C) whether the cost can be traced to a particular cost object in an economically feasible way
• D) whether a cost is fixed or variable

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Definitions:

Break-even Point

Break-even Point is the financial analysis term that indicates when total costs and total revenues are exactly equal, resulting in neither profit nor loss.

Mixed Costs

Costs with both variable and fixed characteristics, sometimes called semivariable or semi-fixed costs.

Variable Components

Parts of a cost or expense that change in proportion with changes in the level of business activity or production volume.

Fixed Components

The elements of a business's costs that remain constant regardless of the level of production or sales activity.