Cost Behaviour - Warm Up Excercise
Cost Behaviour - Warm Up Excercise
This article is part of a tutorial.
Tutorial Index page - Classification of Marginal Costing Expenses
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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