To decide whether the cost is variable cost or fixed cost with respect to some specific activity depends upon ___________?
Correct answer: A. time horizon
- A. time horizon
- B. unit of production
- C. units of labor
- D. units of inventory
Explanation
Cost behavior depends on the relevant time horizon: a cost may be fixed in the short run but variable over a longer period. Units of production or inventory do not determine this classification by themselves.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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