20.2. Classification of Costs

Try these first

1. 1.

   What type of cost is directly attributed to the production of a product?

   Hint

   Think about costs that can be traced to a specific item.

2. 2.

   What are costs such as office rent classified as?

   Hint

   These are costs that cannot be traced back to a specific product.

3. 3.

   What is an example of a direct cost?

   • Electricity bill
   • Raw materials
   • Office rent

   Hint

   Think of costs that you can easily assign to a product.

4. 4.

   True or False: Fixed costs increase with production volume.

   • True
   • False

   Hint

   Recall the definition of fixed costs.

5. 5.

   A software development project has fixed costs of $3000 per month and variable costs of$100 per hour of labor. If the team works 150 hours this month, what are the total costs?

   Hint

   Calculate fixed and variable costs separately before adding.

6. 6.

   Consider a company that found that its direct costs included $2000 in materials, while their indirect costs were$5000 last month. What percentage of the total costs were direct?

   Hint

   Calculate total costs first before determining the percentage.