CPA Business Environment and Concepts (BEC) : Variable vs Fixed Costs
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Example Questions
Example Question #1 : Variable Vs Fixed Costs
A cost that is fixed per unit is an example of a:
Direct cost
Variable cost
Fixed cost
Mixed cost
Variable cost
A variable cost is one that varies in total but is fixed per unit.
Example Question #2 : Variable Vs Fixed Costs
There are a variety of ways of classifying costs of an object as either fixed or variable. The most accurate method is considered to be:
The high-low method
The account analysis method
The regression analysis method
The engineering method
The regression analysis method
The most accurate method and method mentioned within the AICPA text is the regression analysis method.
Example Question #3 : Variable Vs Fixed Costs
An example of an internal failure cost is:
Inspection
Rework
Product recalls
Maintenance
Rework
Rework is an internal failure cost.
Example Question #1 : Variable Vs Fixed Costs
Which of the following statements is correct regarding the difference between the absorption costing and variable costing methods?
When production equals sales, absorption costing income is less than variable costing income.
When production is less than sales, absorption costing income is greater than variable costing income.
When production is greater than sales, absorption costing income is greater than variable costing income.
When production equals sales, absorption costing income is greater than variable costing income.
When production is greater than sales, absorption costing income is greater than variable costing income.
When production is greater than sales, absorption costing income is greater than variable costing income.
Example Question #5 : Variable Vs Fixed Costs
Using the variable costing method, which of the following costs are assigned to inventory?
A: Variable selling and admin costs B: Variable factory overhead costs
B
A
Both
Neither
B
Under variable costing, only the variable manufacturing costs are assigned to inventory.
Example Question #6 : Variable Vs Fixed Costs
Which of the following would be classified as a fixed cost?
Direct materials
Neither
Both
Annual warehouse insurance
Annual warehouse insurance
No matter how much production occurs at the warehouse each year, insurance will remain fixed whereas the more production, the more direct materials cost.
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