Commercial Applications
Direct cost increases when ……………
- Sales price of product increases
- Cost of raw material increases
- Tax increases
- Subsidy increases
Cost
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Answer
Cost of raw material increases
Reason — Direct cost includes direct material, direct labour and direct expenses. Raw material is direct material, so when the price/cost of raw material rises, the direct material cost — and consequently the direct cost — increases proportionately. Sales price affects revenue, not cost; tax affects total cost only if it is a direct levy on the product; and subsidies usually reduce cost rather than increase it.
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Related Questions
What is a defining feature of semi-variable (mixed) costs?
(1) They remain constant across various activity levels.
(2) They solely consist of variable components.
(3) They only apply to service industries.
(4) They include both fixed and variable elements.
- 1 & 2
- Only 4
- Only 1
- 3 & 4
Fixed cost is a cost which remains same at ……………
- All levels of output
- Even zero level of output
- Both (A) and (B)
- Neither (A) nor (B)
Cost means:
- Revenue paid for something
- Price paid for something
- To generate expenses
- Depreciation earned
Rent of an office premises is an example of ……………
- Semi-variable Cost
- Semi-fixed Cost
- Fixed Cost
- Variable Cost