To determine which of the provided formulas is correct, let's analyze each statement based on general principles of cost accounting.
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Total variable costs × Total labor costs = Other variable costs
This formula does not hold true. Total variable costs are typically the sum of all variable costs, so this equation does not make sense. -
Total costs = Total fixed costs + [(Total labor costs + Other variable costs)]
This formula is correctly structured if we interpret total costs as including both fixed and variable components (where variable costs can include labor). However, variable costs should be represented overall, not as separate additions if they are already part of total variable costs. -
Total labor costs × Other variable costs = Total variable costs
This equation does not hold as written because total variable costs consist of multiple components and multiplying labor costs by other variable costs does not equate to total variable costs. -
Total fixed costs = Total labor costs + Other variable costs
This is not accurate because total fixed costs should represent the fixed portion of costs, while total labor costs and other variable costs are typically variable in nature.
From this analysis, the closest alignment to correct cost accounting principles is:
Total costs = Total fixed costs + [(Total labor costs + Other variable costs)]
However, it could be clearer by writing it as:
Total costs = Total fixed costs + Total variable costs
If you look for the best option as is, option 2 is the most reasonable, assuming that it acknowledges total variable costs consist of labor and other variable costs. So the second option has the best framework but could use clearer wording.