Question

Which of the following is not an example of a cost that varies in total as the number of units produced changes?

Answer 1

Answer:

The correct answer is letter "B": straight-line depreciation on factory equipment.

Explanation:

Manufacturing companies may have fixed costs, variable costs, and mixed costs. Fixed costs are those whose total cost does not vary when the volume of production changes. Variable costs are those that fluctuate in line with shifts in rates of output. Mixed costs are a mix of fixed and variables costs.

Therefore, straight-line depreciation on factory equipment is not an example of variable costs since it is a fixed cost.

Answer 2

Answer:

b) straight line depreciation on factory equipment

Explanation:

The other three cost components are directly related to the level of production.

Wages of the assembly works increases with the level of production.

Direct materials also moves with the level of production

Electricity consumption is also linked to the level of production.

The depreciation on factory equipment on straight line method is not dependent on level of production. Even if there is no production the depreciation has to be charged