If each furnace required a hose that costs $20 and 2,000 furnaces are produced for the month, the $40,000 total cost for hoses
A)is considered to be a direct fixed cost.
B)is considered to be a direct variable cost.
C)is considered to be an indirect fixed cost.
D)is considered to be an indirect variable cost.
E)is considered to be variable or fixed, depending on the relevant range.

Question

Quizplus · Accepted Answer

The cost of hoses is directly related to the number of furnaces produced. Therefore, it is considered a direct cost. However, the cost varies depending on the number of furnaces produced, making it a variable cost. Therefore, the correct answer is B, a direct variable cost.

If Each Furnace Required a Hose That Costs $20 and 2,000