Which of the Following Is an Example of a Cost

question 36

Multiple Choice

Which of the following is an example of a cost that varies in total as the number of units produced changes?

• A) Salary of a production supervisor
• B) Direct materials cost
• C) Property taxes on factory buildings
• D) Straight-line depreciation on factory equipment

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Definitions:

Variable Costing

An accounting method that only includes variable production costs (materials, labor, and overhead) in product costs, excluding fixed costs.

Unit Product Cost

The total cost to produce one unit of product, including direct materials, direct labor, and a portion of all overhead costs.

Variable Costing

A system in accounting that considers solely the changing costs associated with production (direct materials, direct labor, and variable manufacturing overhead) in the calculation of product prices.

Net Operating Income

Net Operating Income, often abbreviated as NOI, is a financial metric that calculates a company’s profit after subtracting operating expenses excluding taxes and interest.