Asked by Mitylene Bailey on May 10, 2024
Verified
Select cost information for Klondike Corporation is as follows: 
Based on this information:
A) Both direct materials and rent expense are variable costs.
B) Direct materials is a fixed cost and rent expense is a variable cost.
C) Both direct materials and rent expense are fixed costs.
D) Direct materials is a variable cost and rent expense is a fixed cost.
E) Both direct materials and rent expense are mixed costs.
Variable Costs
Expenditures that adjust in alignment with production levels or sales quantities, notably including labor and raw materials.
Fixed Costs
Costs that do not vary with the level of production or sales activities, such as rent, salaries, and insurance premiums.
Mixed Costs
Expenses that have both fixed and variable components, changing in total with the level of activity but not proportionally.
- Identify and classify costs as variable, fixed, or mixed based on given scenarios.
Verified Answer
EI
Emily InfanteMay 16, 2024
Final Answer :
D
Explanation :
The cost information given indicates that there are two cost components, direct materials and rent expense. Direct materials is given as a variable cost, which means that it changes in proportion to the level of production. Rent expense is given as a fixed cost, which means that it remains constant regardless of the level of production. Therefore, the correct answer is D – direct materials is a variable cost and rent expense is a fixed cost.
Learning Objectives
- Identify and classify costs as variable, fixed, or mixed based on given scenarios.