1、A production worker is paid a salary of $650 per month, plus an extra 5 cents for each unit produced during the month.
How is this type of labour cost best described?
A. A variable cost
B. A step cost
C. A semi-variable cost
D. A fixed cost
The correct answer is: A semi-variable cost
The salary is part fixed ($650 per month) and part variable (5 cents per unit). Therefore it is a semi-variable cost.
2、A company makes chairs and tables.
Which of the following items would be treated as an indirect cost?
A. Metal used for the legs of a chair
B. Fabric to cover the seat of a chair
C. Wood used to make a chair
D. The salary of the sales director of the company
The correct answer is: The salary of the sales director of the company.
The sales director's salary is a selling overhead.