Multiple Choice
The first step in preparing a flexible budget is to:
22
views
3. Accrual Accounting Concepts
Introduction to Adjusting Journal Entries and Prepaid Expenses
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
A mixed cost contains:
A
neither fixed nor variable cost components
B
only fixed cost components
C
only variable cost components
D
both fixed and variable cost components
Verified step by step guidance1
Understand the concept of mixed costs: Mixed costs are expenses that have both fixed and variable components. Fixed costs remain constant regardless of activity level, while variable costs change with the level of activity.
Identify examples of mixed costs: Common examples include utility bills, where there is a fixed base charge plus a variable charge based on usage, or delivery expenses, which may include a fixed monthly fee and a variable cost per delivery.
Analyze the components: Break down the mixed cost into its fixed and variable parts. For example, if a utility bill has a fixed charge of $50 and a variable charge of $0.10 per kilowatt-hour, the fixed component is $50, and the variable component depends on usage.
Understand the importance in accounting: Mixed costs are significant because they need to be separated into fixed and variable components for budgeting, forecasting, and decision-making purposes. This is often done using methods like the high-low method or regression analysis.
Apply the concept: When solving problems involving mixed costs, always check if the cost includes both fixed and variable components. If it does, it is classified as a mixed cost.
2:56mWatch next
Master Introduction to Adjusting Journal Entries with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
Introduction to Adjusting Journal Entries and Prepaid Expenses practice set
Problem sets built by lead tutorsExpert video explanations