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Classifying Costs as Fixed or Variable

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"Classification of costs into variable and fixed categories depends on the decision situation." Explain.

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Solution Summary

Your tutorial is 281 words and agrees with the comment. There are three criteria that help you to discern variable from fixed and these are each discussed in everyday language suitable for novices.

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Variable and fixed is a description of the behavior of costs. The behavior of costs depend on the activity and span of time examined. It can also depend on the decision.

Time span. For instance, if you are thinking about a five-year period, the cost of cell phone service is likely variable. However, if you are thinking about a one-year period, the cost of cell phone service is likely fixed because you have to lock into a one-year ...

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