Question

Which of the following is an example of a cost that varies in total as the number of units produced changes? a. property taxes on factory buildings b. direct materials cost c. straight-line depreciation on factory equipment d. salary of a production supervisor

Answer 1

Answer:

b. direct materials cost

Explanation: The cost of production of a product is determined by the sum of different factors needed for the production, these factors include direct and indirect labor force cost, amortized costs of the machinery and supplies. the depreciation of the machinery on factory equipment depends on the lifetime of the machinery, not in the daily use of the same equipment. in that case, it does not vary according to the units produced.

The property taxes on factory buildings are applied to the total properties belonged by the company, it is not affected by the production levels.

The salary of a production supervisor is a constant cost that does not change per the production level, in this specific case, the supervisor is nor being paid per unit, so the payment will be the same every month.

In the case of direct materials cost, as the company is producing more products it is necessary to increase the supplies used for the specific product, as an example if you want to produce 20 dolls you will need 20 toy heads, but if you want to produce 50 dolls you will need 50 toy heads; in this case the cost of the materials varies according to the units that the company wants to produce

Answer 2

Answer:

The correct answer is letter "B": direct materials cost.

Explanation:

Variable costs change depending on the volume of production of the company. Variable costs increase when a company produces more goods or services and goes down when it produces fewer goods or services. This is opposed to fixed costs that do not change in proportion to the amount manufactured.

Direct materials costs, production supplies, and commissions are examples of variables costs.