Question

At a plant where a union agreement sets annual salaries and conditions, annual labor costs usually: A. Are considered a variable cost B. Are considered a fixed cost C. Depend on the scheduling of floor workers D. Depend on the scheduling of production runs

Answer 1

Answer:

B. Are considered a fixed cost

Explanation:

Fixed costs refer to those costs which do not change in quantum irrespective of the level of output. For example, factory rent would be a fixed cost

Variable costs refer to those costs which vary or change with the level of output. For example, sales commission expressed as a percentage of sales.

As per the given information, the involvement of labor union for union agreement , so as to set annual salaries and conditions, would lead to a certain amount of wages which workers must be paid, which would make it a fixed cost.

In this case, the union would get wages fixed by employers which would now make such costs fixed in nature.

Answer 2

Answer:

The correct answer is letter "B": Are considered a fixed cost.

Explanation:

Fixed costs are business expenses that do not change when production levels increase or decrease. They are one of two types of business expenses the other being variable costs. Variable costs do change as the volume of production changes.

Thus, if in a company a union sets the wages of employees annually, those amount will not change in the course of the period, Then, they can be considered fixed costs.