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Question 237 - CSCP discussion

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In the analysis of costs, fixed costs are those that are:

A.
independent of the volume of output.
Answers
A.
independent of the volume of output.
B.
dependent on the utilization of the asset.
Answers
B.
dependent on the utilization of the asset.
C.
inversely proportionate to the volume of output.
Answers
C.
inversely proportionate to the volume of output.
D.
constant through the useful life of the asset.
Answers
D.
constant through the useful life of the asset.
Suggested answer: A

Explanation:

Fixed costs are those expenses that remain constant regardless of the volume of output produced. These costs do not fluctuate with changes in production levels, making them independent of output volume. Examples of fixed costs include rent, salaries, and insurance. They are incurred even when production levels are zero. Fixed costs are not dependent on asset utilization, inversely proportionate to output, or constant through the useful life of the asset but are instead constant in relation to production volume.

Horngren, C. T., Datar, S. M., & Rajan, M. V. (2014). Cost Accounting: A Managerial Emphasis. Pearson.

Drury, C. (2013). Management and Cost Accounting. Cengage Learning.

asked 16/09/2024
Jeffrey Sammaritano
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