Classifying costs by behavior with changes in volume of activity involves:

A) Identifying fixed costs and variable cost.
B) Identifying cost of goods sold and operating costs.
C) Identifying costs as financial or managerial.
D) Identifying costs in a physical manner.
E) Identifying both quantitative and qualitative cost factors.

Fixed Costs

Expenses that remain constant regardless of business activity levels, including long-term leases, salaries, and insurance premiums.

Variable Cost

A cost that varies with the level of output or production volume.

Volume of Activity

The level of production or sales volume at which a business operates during a specific period.