Explain how to find the variable cost and ABC cost.

Question:

Explain how to find the variable cost and ABC cost.

Cost:

In economics and business, cost refers to the amount paid by a company for various resources. The cost is an important measure for understanding how a business performs, and there are different ways of calculating it.

Answer and Explanation:

The variable cost is found by looking only at the direct costs attributable to a product. For example, if a product costs $3 to produce, in addition to $500 of fixed costs, only the $3 is registered for the variable cost. Activity Based Costing (ABC) requires also adding in the fixed costs that go into the product. As such, ABC cost also has to add the $500 fixed cost.


Learn more about this topic:

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Variable Costing: Method, Formula & Advantages

from Financial Accounting: Help and Review

Chapter 13 / Lesson 5
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