The cost of electricity for running production equipment is classified as:

Question

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The cost of electricity for running production equipment is a variable cost as it is directly linked to the production output. This cost varies with the level of production and is therefore classified as a direct cost of production. Choice A represents variable costs directly associated with production, which includes the cost of electricity for running production equipment. Choice B represents fixed costs such as rent and salaries, which are not affected by changes in production levels. Choice C represents overhead costs such as administrative expenses, which are not directly related to the production process. Choice D represents sunk costs such as research and development expenses that are already incurred and cannot be recovered.

The Cost of Electricity for Running Production Equipment Is Classified