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chpt 3 faq - FAQs Chapter 3 1 Are all direct costs variable...

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FAQs – Chapter 3 1. Are all direct costs variable? Explain. All direct costs are variable by definition since they can be directly traced to the cost object, and thus must vary with the cost driver or volume of output. 2. Are all fixed costs indirect? Explain. Fixed costs are usually indirect, since the increase in the cost driver or volume of output does not affect the level of fixed cost. However, if the cost object is not volume based (for example, if it is a department or product line), then some fixed costs (such as the salary of the department head) could be directly traced to the cost object and therefore the fixed cost would also be a direct cost in this case. 3. What is the difference between variable and fixed costs? Variable costs are those for which total cost changes with each change in the cost driver. Fixed costs are the portion of total cost which remains constant as the cost driver changes.
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