Multiple Choice
Materials that are crucial parts of a finished product are called:
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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A cost that includes both fixed and variable cost components is called a:
A
Variable cost
B
Direct cost
C
Fixed cost
D
Mixed cost
Verified step by step guidance1
Understand the definition of a mixed cost: A mixed cost is a cost that contains both fixed and variable components. Fixed costs remain constant regardless of activity level, while variable costs change with the level of activity.
Compare mixed costs to other types of costs: Variable costs change proportionally with activity levels, fixed costs remain constant, and direct costs are directly traceable to a specific cost object. Mixed costs combine elements of fixed and variable costs.
Identify examples of mixed costs: Examples include utility bills (which often have a fixed base charge plus a variable charge based on usage) or salaries with bonuses tied to performance.
Recognize the importance of mixed costs in financial accounting: Mixed costs are significant because they require separation into fixed and variable components for accurate budgeting, forecasting, and decision-making.
Apply the concept to the problem: Based on the definition and characteristics of mixed costs, the correct answer to the problem is 'Mixed cost,' as it includes both fixed and variable components.
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