Classifying Costs as Fixed and Variable in a Service Entity

question 37

Multiple Choice

Classifying costs as fixed and variable in a service entity enables managers to

• A) control costs.
• B) measure performance.
• C) cost services.
• D) cost organisational units.

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Definitions:

Variable Overhead

Indirect production costs that fluctuate with the level of output, such as utilities or materials.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity level, allowing for more accurate cost control.

Monthly Sales

The total revenue generated from sales within a month, often tracked to assess business performance.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as raw materials and direct labor expenses.