Understanding Cost Classification

Understanding Cost Classification

Professional Development

15 Qs

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Understanding Cost Classification

Understanding Cost Classification

Assessment

Quiz

Others

Professional Development

Hard

Created by

Fahad Ahad

FREE Resource

15 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What are the main types of costs in accounting?

Sunk costs

Inflation costs

Opportunity costs

Fixed costs, variable costs, direct costs, indirect costs, operating costs, non-operating costs.

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Define fixed costs and provide an example.

Cost of raw materials for production

Employee salaries that change monthly

Utilities expenses that vary with usage

An example of fixed costs is the monthly rent for a business premises.

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What are variable costs and how do they differ from fixed costs?

Variable costs are always higher than fixed costs.

Variable costs fluctuate with production volume, while fixed costs remain constant.

Variable costs are unrelated to production volume and remain constant.

Fixed costs change with production levels, while variable costs do not.

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Explain the high-low method in cost estimation.

The high-low method focuses solely on fixed costs without considering variable costs.

The high-low method is used to predict future sales based on past performance.

The high-low method calculates total costs based on average activity levels.

The high-low method estimates costs by analyzing the highest and lowest activity levels and their associated costs to determine variable and fixed costs.

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

List the steps involved in the high-low method.

Identify high and low activity levels, determine costs, calculate variable cost per unit, calculate fixed costs, formulate cost equation.

Calculate average costs for all units

Ignore fixed costs in the analysis

Estimate total costs without activity levels

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

How do you calculate the variable cost per unit using the high-low method?

Variable cost per unit = (Cost at highest activity - Cost at lowest activity) / (Highest activity level - Lowest activity level)

Variable cost per unit = Cost at highest activity - Cost at lowest activity

Variable cost per unit = Total cost / Total units produced

Variable cost per unit = (Cost at lowest activity + Cost at highest activity) / 2

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is prime cost and what components does it include?

Prime cost includes overhead and marketing expenses.

Prime cost consists of fixed costs and variable costs.

Prime cost is the total cost of production including all indirect costs.

Prime cost includes direct materials and direct labor.

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