Concept explainers
Cost behavior analysis :
Cost behavior analysis means to study how the cost changes as the level of volume changes. Sometimes it may be fixed, it may be variable, it may be constant at certain level etc.
Variable Cost:
A variable cost is the cost that changes at each level and volume of activity changes. It never remains fixed in totality. It increases at consistent rate on per unit basis as the level of output increases and vice versa. Each variable cost is having cost driver such as per hour or per unit.
Fixed Cost:
A Fixed cost is a cost which remains same in totality with the change in activity level. It never remains fixed per unit. It remains fixed even at zero level of activity. Most fixed costs are expressed in terms of time such as per year or per month. It is having no cost driver.
If we classify the cost as fixed or variable then there will be possibility that each cost incurred on individual basis may not behave as per their classification
In the given question we have to explain that why we need to classify all the costs either as fixed cost or as variable cost even if the cost classified may not behave as per its classification. We have to justify the same with two arguments.
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Chapter 21 Solutions
FUNDAMENTAL ACCT PRIN CONNECT ACCESS
- Over the units in a batcharrow_forwardPell Company acquires 80% of Demers Company for $500,000 on January 1, 2022. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2022 2023 2024 Net income $ 100,000 $ 120,000 $ 130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. Compute the noncontrolling interest in Demers at December 31, 2024. Multiple Choice $146,800 $160,800 $107,800 $80,000 $140,000arrow_forwardProvide General Accounting Questionarrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
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