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If you have difficulty answering the following questions, learn more about this topic by reading our Improving Profits (Explanation).
Fixed expenses are best described as expenses that remain the same
Variable expenses are best described as expenses that change
Expenses that will be the same amount under two alternative proposals are not relevant when selecting one of the proposals. In other words, the expenses that are the same could be omitted from both alternatives without affecting the decision.
A general rule for profit maximization in the short run is: if the additional revenues exceed the additional expenses...do it.
The most relevant amounts for making a decision are found in the general ledger.
If a company's sales were to triple, some fixed expenses are likely to increase.
A sole proprietor's compensation will be included in Salaries Expense.
The original cost of an asset presently in use is generally not relevant in the decision to replace the asset.
A significant amount of money to be received from the sale of equipment being replaced is relevant in the decision to replace the equipment.
A variable expense means that the per unit amount will vary with sales.
Which costs are the most relevant in deciding between two alternatives?
The salary of the vice-president of human resources is likely to be classified into which cost behavior?
The office rent is likely to be classified into which cost behavior?
Commissions Expense is likely to be classified into which cost behavior?
The expense of operating the shipping department is likely to follow which cost behavior?
The property tax on the administrative office building is likely to follow which cost behavior?
A retailer's cost of goods sold is likely to behave as which type of cost?