Concept Introduction:
Variable cost and fixed costs:
Variable costs:
The variable costs can be defined as the cost that change directly with the change in the level of output. They are directly related with the level of output. These costs are termed relevant costs as well.
Fixed costs:
The fixed costs can be defined as the cost that do not change directly with the change in the level of output. They are not related with the level of output. These costs are termed irrelevant costs generally.
Direct and Indirect costs:
Direct costs:
Direct costs can be defined as the cost which can be directly associated or linked with each unit of product. For example, 1 lbs raw material used to produce 1 furnished unit and 1 labor hour is required to produce 1 furnished unit.
Indirect costs: Indirect costs can be defined as the cost which cannot be directly associated or linked with each unit of product. For example, supervisor's salary for the month or
To classify:
The following costs as either (a) variable or fixed and (b) direct or indirect costs.

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Chapter 18 Solutions
CONNECT ONLINE ACCESS FOR FUNDAMENTAL AC
- PUG Company's revenue for March is $75,000, but only $15,000 cash is collected. Expenses for March are $41,000, of which $28,000 is paid in cash. During March, additional capital stock is issued in exchange for $5,000 cash. Using the accrual basis of accounting, what would PUG Company’s income statement for March report?arrow_forwardDo fast answer of this general accounting questionarrow_forward??!arrow_forward
- A warehouse with an appraisal value of $145,320 is made available at an offer price of $168,750. The purchaser acquires the property for $40,500 in cash, a 90-day note payable for $26,500, and a mortgage amounting to $62,900. What is the cost basis recorded in the buyer's accounting records to recognize this purchase? a) $168,750 b) $145,320 c) $129,900 d) $121,460 MCQarrow_forwardIf UPPA Company had net income of $561,600 in 2022 and it experienced a 17% increase in net income over 2021, what was its 2021 net income?arrow_forwardFinancial accountingarrow_forward
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