Cost Behaviour - Warm Up Excercise

In this chapter, you will find different types of questions on cost behaviour, i.e. behaviour of the different Marginal costing expenses (Fixed, Variable and Mixed) all accurately answered - true or false with reasons, fill in the blanks, multiple choice and FAQs.

Cost Behaviour - Warm Up Excercise

Cost behaviour

 

Q: The expense of operating the shipping department is likely to follow which cost behavior?

  • Fixed
  • Mixed
  • Variable

Which one is right?

Answer:

The answer is Mixed.

Reason:

The shipping department will likely have some expenses that are fixed.

(depreciation of equipment)

 

Q: The property tax on the administrative office building is likely to follow which cost behavior?

  • Fixed
  • Mixed
  • Variable

Which one is right?

Answer:

The answer is Fixed.

Reason:

The property tax on the office building will not change because of reasonable change in Sales volume or other activity.

 

Q: A retailer's cost of goods sold is likely to behave as which type of cost?

  • Fixed
  • Mixed
  • Variable

Which one is right?

Answer:

The answer is Variable.

Reason:

A retailer’s cost of goods will increase in total as sales increases and decreases in total as sales decreases.

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