Commercial Applications
Amount spent to purchase a machinery is the example of …………… cost.
- Variable
- Fixed
- Prime
- None of these
Cost
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Answer
Fixed
Reason — The cost of purchasing machinery is a one-time capital outlay that does not change with the level of output. The depreciation on this machinery, which is the cost-recognition spread over the asset's useful life, is treated as a fixed cost because it remains the same regardless of how many units are produced. Variable cost changes with output, prime cost is direct material + direct labour + direct expenses — neither describes machinery cost.
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Related Questions
Which of the following best describes a fixed cost?
- A cost that remains at the same level up to a particular level of output.
- The cost changes with levels of output.
- A cost that remains at the same level when output increases.
- None of these
Which of the following is best suited meaning of overhead?
- Overhead is the cost incurred in the course of buying a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department.
- Overhead is the cost incurred in the course of making a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department.
- Overhead is the cost incurred in the course of selling a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department.
- Overhead is the cost incurred in the course of advertising a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department.
Which of the following is overhead cost?
- Amount spent on raw material
- Salary of the finishing cost centre supervisor
- Wages paid to labour
- None of these
Variable cost per unit increases when ……………
- Volume of production decreases
- Volume of production increases
- Cost of raw material decreases
- Tax decreases