Using the account classification method, estimating the change in variable costs involve three steps.Which of the following is correct?
A)I.Sum the costs classified as fixed to obtain the total fixed costs for the most recent period. II.Multiply the amount in (I) by the volume of activity for the corresponding period to estimate the unit fixed cost.
III)Divide (2) by the change in activity to estimate the total controllable cost.
B)I.Sum the costs classified as fixed to obtain the total fixed costs for the most recent period. II.Divide the amount in (I) by the volume of activity for the corresponding period to estimate the unit fixed cost.
III)Multiply (2) by the change in activity to estimate the total controllable cost.
C)I.Sum the costs classified as variable to obtain the total variable costs for the most recent period. II.Multiply the amount in (I) by the volume of activity for the corresponding period to estimate the unit variable cost.
III)Divide (2) by the change in activity to estimate the total controllable cost.
D)I.Sum the costs classified as variable to obtain the total variable costs for the most recent period. II.Divide the amount in (I) by the volume of activity for the corresponding period to estimate the unit variable cost.
III)Multiply (2) by the change in activity to estimate the total controllable cost.

Question

Quizplus · Accepted Answer

This is the correct method for estimating the change in variable costs using the account classification method. Step 1 involves summing the costs classified as variable to obtain the total variable costs for the most recent period. In step 2, the amount in Step 1 is divided by the volume of activity for the corresponding period to estimate the unit variable cost. Finally, in step 3, the unit variable cost (from step 2) is multiplied by the change in activity to estimate the total controllable cost.

Using the Account Classification Method, Estimating the Change in Variable