   Chapter 11, Problem 4CDQ

Chapter
Section
Textbook Problem

How would each of the following costs be classified if units produced is the activity base? a. Salary of factory supervisor (\$120,000 per year) b. Straight-line depreciation of plant and equipment c. Property rent of \$11,500 per month on plant and equipment

To determine

Concept Introduction:

Variable, Fixed and Mixed Cost:

There are three types of costs according to the unit of production; Variable, Fixed and Mixed. Variable costs change proportionally with the number of units produced and variable cost per unit remains constant. Fixed Cost remains same in totality irrespective of the number of units produced. The mixed cost is the mix of variable and fixed cost, some of its part is fixed and some variable.

To Indicate:

The classification of each cost

Explanation

There are three types of costs according to the unit of production; Variable, Fixed and Mixed. Variable costs change proportionally with the number of units produced and variable cost per unit remains constant. Fixed Cost remains same in totality irrespective of the number of units produced...

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