Bonus Question: Commissions are considered fixed costs.

Question

BlackTom AI · Accepted Answer

Question restated: The prompt asks whether commissions are considered fixed costs, and provides two options: True or False.
Option 1: True. This statement would imply that commissions are fixed costs, meaning they do not vary with the level of production or sales in the short term. In most business contexts, commissions are typically variable costs because they change in direct proportion to sales or performance metrics. Therefore, labeling commissions as fixed costs would be inaccurate given the common cost behavior pattern where variable costs fluctuate with activity levels.
Option 2: False. This statement asserts that commissions are not fixed costs, i.e., they are not constant regardless of activity level. Commissions usually vary with sales volume or performance, which aligns with the standard understanding of variable costs. This makes the claim that commissions are not fixed costs the correct interpretation in typical managerial accounting and cost behavior discussions.
Analytical contrast:
- If commissions were fixed, they would not change with sales, production, or output; however, sales-driven compensation typically increases as sales rise, indicating a variable nature. This undermines the True option.
- The False option correctly characterizes commissions as a cost that fluctuates with activity (such as sales volume or targets achieved), consistent with common cost classification.
Overall, the reasoning hinges on the distinction between fixed costs (unchanging with activity) and variable costs (changing with activity). Commissions align with the variable-cost category in most practical scenarios, which challenges the assertion that they are fixed. This explains why the statement asserting them as fixed costs is not correct, and why the alternative viewpoint aligns with standard cost behavior.

GBUS4330W01 25 Fall GBUS 4330 Final Exam - Requires Respondus LockDown Browser

Bonus Question: Commissions are considered fixed costs.

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GBUS*4330*W01 25 Fall GBUS 4330 Final Exam - Requires Respondus LockDown Browser

Bonus Question: Commissions are considered fixed costs.

View Explanation

Log in for full answers

Similar Questions

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GBUS4330W01 25 Fall GBUS 4330 Final Exam - Requires Respondus LockDown Browser