On the Income Statement, which of the following would be classified as a variable cost?
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a) Direct Labor Expense
b) R&D Expense
c) Promotion Expense
d) Depreciation Expense
Choice A is the correct answer
Variable costs refer to costs that vary with the level of production. An example of such costs include direct labor expense. As the level of production increases, the amount direct labor expense also increases.
Research & Development expenses refers to direct costs relating to the firm’s effort to design, improve, and develop services, processes, products and technologies. They are variable and fixed expenses.
Meaning of Promotion Expense and Depreciation Expense
Promotion expense represents the expense corporations incur to promote their services or products to clients. It is a fixed cost.
Depreciation expense represents a non-cash cost that institutions subtract from their net earnings. It represents a fixed Cost