(10 marks) Question Seven t. Knowledge of the identity and classification of a s
ID: 2535797 • Letter: #
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(10 marks) Question Seven t. Knowledge of the identity and classification of a specific cost is essential when making business decisions 2 An indirect cost is nomally controllableby an operating depatment head 3. A joint cost is one that is partly direct and partly indirect 4. A sunk cost is one that is not normally relevant to future decisions 5. A fxed cost is one that never changes, even in the long nun 6 A semi variable cost is one that is partly fxed and partly variable 7. A variable cost is one that varies in linear fashion with sales revenue 8. A standard cost is what the cost should be for a given level of sales revenue. 9. An opportunity cost is one that is recorded on the income statement 10. A discretionary cost is one that can either be incurred or not incurred 11. Allocaton of indirect costs to operating departments should be done with caution. 12 One should never sell below total cost 13 If at an equivalent sales revenue level, Business A has higher fixed costs than Business B, then Business B wll make more net income than Business A from each additional sales revenue dollar above the current level. 14 Given two comparable business situations, the one with the lower foxed costs wil have a higher break- even sales revenue level 15. The equation for calculating the indifference point when deciding to pay a fxed rent amount or rent based on a percent of sales revenue is. Fixed rent costs divided by the variable rate percent 16. On a multipoint graph, the information about the independent variable is plotted on the vertical axis 17. On a multpoint graph, only one correct' straight line can be drawn. 18. Onamltpontgraph, the point at which the sloped straghtline intersects the vertial as gives the amount of total variable costsExplanation / Answer
1) True
2)false
3)true
4) false
- knowledge of identity and classification of specific cost is important while decision making , cost is also an important factor for decision making becuase it directly link the selling orice and margin of a product.
-Indirect cost cannot be controlled byoperating departmemt head .
- joint cost are partly direct and indirect cost , it may include iverhead cost which is indorect.
- sunk cost are irrelevent cashflow since they are payable in when we reject or acccept the project.
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