Cost Terminologies and Classification Quiz

Which cost terminology refers to the cost that remains fixed within a certain production range?

What is the cost that varies in direct proportion to the level of production?

Which classification of costs includes both fixed and variable components?

What are the elements of a cost sheet?

How are costs classified in terms of their behavior?

What is the significance of understanding cost terminologies in business decision-making?

Cost Terminology

Fixed cost: Remains unchanged within a specific range of production, regardless of output levels.
Variable cost: Changes in direct proportion to the amount of production, increasing or decreasing with output.

Cost Classifications

Mixed cost: Contains both fixed and variable components, reflecting both types of behavior in cost structure.

Cost Sheet Elements

Direct materials: Raw materials directly involved in the production process.
Direct labor: Labor costs directly attributable to production.
Overhead: Indirect costs that support production, including utilities, maintenance, and depreciation.

Cost Behavior Classification

Fixed costs: Incurred regardless of production volume, offering stability in budgeting.
Variable costs: Fluctuate with production levels, allowing for adaptability in financial planning.

Importance of Understanding Cost Terminology

Informs effective budgeting and forecasting, aiding in financial decision-making and management.
Enhances cost control measures, contributing to improved profitability and strategic planning.
Supports pricing strategies and helps assess financial viability of projects.

Test your knowledge of cost terminologies, elements, and the classification of costs in a cost sheet. Identify the cost that remains fixed within a certain production range, understand the cost that varies in direct proportion to the level of production, and learn about the classification of costs that includes both fixed and variable components.