To make predictions about costs and income,costs must be classified as either
A)fixed or variable.
B)product or administrative.
C)direct material or conversion.
D)direct or indirect.

Question

Quizplus · Accepted Answer

To make accurate predictions about costs and income, it is necessary to classify costs as fixed or variable. Fixed costs are those which remain the same regardless of the volume of output, while variable costs change in proportion to the level of production. This distinction is important for budgeting, forecasting, and determining the profitability of products or services. While the other classifications mentioned (product, administrative, direct material, and conversion) may be useful for certain purposes, they are not as applicable to cost prediction and analysis as fixed and variable costs.

To Make Predictions About Costs and Income,costs Must Be Classified