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Costs

1. All costs are either fixed or variable. The only difficulty in cost analysis is determining which of the two categories each cost belongs to.  Do you agree? Explain.

2. Distinguish between direct, indirect, and unallocated costs. Can the same cost can be both direct and indirect? Explain your answer?

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1. All costs are either fixed or variable. The only difficulty in cost analysis is determining which of the two categories each cost belongs to. Do you agree? Explain.

I agree with this statement because this is true when analyzing micro and microeconomics, but more so to that of accounting. An example of a fixed cost is that of buying a large warmer for Scentsy, which is usually $25; this has not changed since the conception of the company. However, a variable cost is that of the plug-in warmer. This went from $15 to $20 due to not enough sales. As one can tell, this is a variable cost, and the one previously is fixed. Each is subject to change because of the economy. In regards to the statement, one has to note that this is difficult to assess because of how much ...

Solution Summary

This solution discussed fixed, variable, direct, indirect and allocated costs.

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