Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

On the income statement, which of the following would be classified as a variable cost?

Salaries of company executives

Depreciation expense on office equipment

Sales commissions based on units sold

Rent expense for administrative offices

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Verified step by step guidance

Understand the concept of variable costs: Variable costs are expenses that change in proportion to the level of activity or production. They increase or decrease depending on the number of units produced or sold.

Analyze each option provided in the problem: Salaries of company executives are typically fixed costs because they do not vary with production or sales levels. Depreciation expense on office equipment is also a fixed cost as it is based on the allocation of the asset's cost over time, regardless of activity levels.

Focus on the correct answer: Sales commissions based on units sold are classified as variable costs because they directly depend on the number of units sold. If more units are sold, the total sales commission increases; if fewer units are sold, the total sales commission decreases.

Evaluate the remaining option: Rent expense for administrative offices is generally considered a fixed cost because it does not fluctuate with production or sales levels. It is a recurring expense that remains constant over a period.

Conclude the classification: Sales commissions based on units sold are the only variable cost among the options provided, as they align with the definition of costs that vary with activity levels.