SOFA-CFE · Question #198
Variable and semi-variable methods include an allocation based upon a usage or production basis.
The correct answer is A. True. Option A is correct because variable and semi-variable cost methods are fundamentally defined by their relationship to activity levels - they allocate costs based on a usage or production basis (e.g., machine hours, units produced, or miles driven). Variable costs change in…
Question
Variable and semi-variable methods include an allocation based upon a usage or production basis.
Options
- ATrue
- BFalse
How the community answered
(51 responses)- A75% (38)
- B25% (13)
Explanation
Option A is correct because variable and semi-variable cost methods are fundamentally defined by their relationship to activity levels - they allocate costs based on a usage or production basis (e.g., machine hours, units produced, or miles driven). Variable costs change in direct proportion to output, while semi-variable costs have a fixed base component plus a variable element tied to usage.
Option B is incorrect because denying this characteristic would contradict the core definition of variable costing - if costs were not allocated on a usage/production basis, they would simply be fixed costs, which is a different category entirely.
Memory tip: Think of the word "variable" itself - costs that vary must vary with something, and that something is always a measure of activity, usage, or production. If there's no usage-based driver, the cost isn't variable.
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