Cost Classification, Concepts and Terminology : Practice Questions

Which of the following costs is typically considered a direct cost for a bakery producing custom-ordered cakes?

A company is considering replacing an old machine with a new one. The old machine has a book value of $$HK\$30,000$$ and a current market value (scrap value) of $$HK\$5,000$$. The new machine costs $$HK\$80,000$$. Which of the following is a relevant cost when deciding whether to replace the old machine?

A company has an option to produce Product X or Product Y using the same limited resource. Producing Product X would yield a contribution margin of $$HK\$200,000$$. Producing Product Y would yield a contribution margin of $$HK\$150,000$$. If the company decides to produce Product X, what is the opportunity cost associated with this decision?

What is the primary characteristic of a variable cost per unit?

For a shoe manufacturer, which of the following costs would be considered a semi-variable cost?

What is the fundamental difference in behavior between a fixed cost and a variable cost when production volume changes?

Distinguish between an indirect material cost and an indirect labour cost, providing one example for each in a car manufacturing plant.

Evaluate whether the rent for a factory building should always be considered a fixed cost for all business decisions, providing a scenario where it might behave differently.