When estimating future costs it is necessary to classify costs into fixed and variable components.

Question

Quizplus · Accepted Answer

Classifying costs into fixed and variable components is necessary for accurately estimating future costs because it helps in understanding how costs will change with different levels of production or activity. Fixed costs do not change with the level of output, while variable costs do, making this distinction crucial for planning and decision-making.

When Estimating Future Costs It Is Necessary to Classify Costs