Question

Larry's Lawn Care is a lawn service company that provides mowing, pruning, and weed management. Larry is trying to get a better understanding of his costs by categorizing them as fixed or variable. Which of the following costs are most likely to be considered fixed costs?
A) the cost of gasoline for the lawn mowers
B) wages paid to lawn care workers
C) the cost of fertilizer
D) the cost of the lease on the mower storage facility

Answer 1

Answer:

D) the cost of the lease on the mower storage facility

All the other options are variable cost.

Explanation:

Fixed cost are costs that do not change as a result of increase or decrease in the amount of goods and services produced. They are expenses that have to be paid irrespective of business activities such as taxes, salaries of administrative staffs, lease of equipment, insurance and so on.

Variable costs are costs dependent on the amount of goods and services produced such as cost of fuel, cost of raw materials, cost of labor to run a machinery.