If a cost is classified as a variable cost in one situation, it may be appropriate to instead classify the same cost as a fixed cost in another situation.

Question

Quizplus · Accepted Answer

A cost can be variable or fixed depending on the situation it is being used in. For example, the cost of raw materials may be a variable cost in a production process where it increases as production increases. However, the same cost of raw materials may be a fixed cost if it is contracted for a specific amount over a certain period of time regardless of the level of production.

If a Cost Is Classified as a Variable Cost in One