CPIM Practice Exam

What are billing and collecting costs?

1. Taxes applied to freight services

2. The variable costs for shipments

3. The fixed administrative costs for service payments

4. Incentive costs for early payments

The correct answer is: The fixed administrative costs for service payments

Billing and collecting costs refer to the administrative expenses associated with invoicing customers and managing receivables. These costs encompass the expenditures tied to generating invoices, tracking outstanding payments, processing receipts, and any associated customer communications. Since these activities typically require a consistent process and staff, they are classified as fixed administrative costs rather than variable or incentive-related costs. In this context, fixed administrative costs provide a stable framework for managing the flow of payments and maintaining financial records. These functions are critical to the overall financial health of a business, ensuring that revenue is collected efficiently and effectively. Additionally, while other options mention elements related to shipping or payment incentivization, they do not encompass the comprehensive definition of billing and collecting costs as administrative expenses. This distinction solidifies why the answer highlighting fixed administrative costs is the most accurate choice.