Applewhite Corporation, a manufacturing company, is analyzing its cost structure in a project toachieve 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 thecost 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.