Answer:
Category 1. Expenses that will vary according to output- Inventory purchase
Category 2. Expenses that will not vary according to output- labor cost, travel allowance, salary of staff, rent,lease of premises.
Explanation:
Costs or expenses that vary with the level of output is termed variable cost. It means that as the output is being produced, the cost incurred in producing such output changes.
Examples of variable cost are inventory purchases etc.
Cost or expenses that do not vary with the level of output is termed fixed cost. Meaning that irrespective of the output, the cost incurred to produce such output remains fixed.
Example includes rent, salary of staff, lease of premises etc. These costs have been fixed even before production and will remain the same whether or not output increases.
