A variable cost that has a deﬁnitive physical relationship to the activity measure is called a (n):
A)discretionary cost.
B)engineered cost.
C)managed cost.
D)programmed cost.
E)committed cost.

Question

Quizplus · Accepted Answer

An engineered cost is a variable cost that has a definite physical relationship to the activity measure. This means that the cost varies systematically with changes in the level of activity. Examples of engineered costs include direct materials and direct labor. Discretionary costs, on the other hand, are costs that management has some discretion in deciding whether or not to incur. Managed costs are costs that are controlled through a management process, such as a budget. Programmed costs are costs that are predetermined based on a formula or other predetermined method. Committed costs are costs that are already incurred or committed and cannot be avoided even if the level of activity decreases.

A Variable Cost That Has a Deﬁnitive Physical Relationship to the Activity