Q1. Explain the distinction between:

(a) direct and indirect costs.

(b) product and period costs.

(c) fixed and variable costs.

Q2. Selling expenses are an example of product cost because they are incurred in relation to making

sales of products. Discuss this statement, giving reasons as to whether you agree or disagree.

Q3. A company has fixed costs of $100 000 for a period, during which time 25 000 units of a product

are sold. Therefore, the fixed cost per unit is $4.00 ($100000/25000 units). This means that the

fixed cost has become a variable cost of $4.00 per unit. Discuss this statement, giving reasons as

to whether you agree or disagree.

Q4. Explain the importance of the relevant range in making decisions about cost behaviour.