Unformatted text preview: le costs. A service company
will normally have a high
proportion of variable costs. A merchandising company
usually will have a high
proportion of variable costs,
like cost of sales.
LO 1 6-9 Examples of Variable Costs
1. Merchandising companies – cost of goods sold.
2. Manufacturing companies – direct materials,
direct labour, and variable overhead.
3. Merchandising and manufacturing companies –
commissions, shipping costs, and clerical costs,
such as invoicing.
4. Service companies – supplies, travel, and
clerical. LO 1 6-10 True Variable Cost Cost Direct materials is a true or proportionately
variable cost because the amount used during a
period will vary in direct proportion to the level of
production activity. Volume LO 1 6-11 Step-Variable Costs Cost A resource that is obtainable only in large chunks (such
as maintenance workers) and whose costs increase or
decrease only in response to fairly wide changes in
activity is known as a step-variable cost.
step-variable Volume LO 1 6-12 Step-Variable Costs Cost...
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- Winter '07
- relevant range, Fixed Monthly, Curvilinear Cost