20.6. Summary

Try these first

1. 1.

   What is a direct cost?

   Hint

   Think of costs you can trace back to a specific item.

2. 2.

   Give an example of a fixed cost.

   Hint

   What costs don't change regardless of production levels?

3. 3.

   What is a direct cost?

   • Costs traceable to a specific cost object
   • Overhead costs for the entire company
   • Variable costs related to production

   Hint

   Think about costs tied directly to items produced.

4. 4.

   True or False: Fixed costs change with production levels.

   • True
   • False

   Hint

   Remember: Fixed costs do not fluctuate.

5. 5.

   A company produces software with a fixed cost of $30,000 and a variable cost of$50 per unit. How many units must they sell to break even if they sell the software for $100 per unit?

   Hint

   Focus on the contribution margin to calculate the break-even point.

6. 6.

   Analyze how a business can adjust its pricing strategy if the marginal cost of a product increases unexpectedly.

   Hint

   Contemplate the balance between cost and customer willingness to pay.