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Question: Applewhite Corporation, a manufacturing company, is analyzing its cost structure in a project to achieve some cost savings. Which of the following statements is/are correct?
I. The cost of the direct materials in Applewhite's products is considered a variable cost.
II. The cost of the depreciation of Applewhite's plant machinery is considered a variable cost because Applewhite uses an accelerated depreciation method for both book and income tax purposes.
III. The cost of electricity for Applewhite's manufacturing facility is considered a fixed cost, even if the cost of the electricity has both variable and fixed components.
1. I, II, and III are correct.
2. I only is correct.
3. II and III only are correct.
4. None of the listed choices is correct.
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