Question

1. Choose a real or made up example of a company, and describe at least three variable costs the

Answer 1

Answer:

Let Sanguine Wines Ltd. refer to a hypothetical company for the purpose. Following would constitute Sanguine Wines Ltd's variable costs:

1. Raw Material or input prices: The raw material or inputs of sanguine wines limited purchases from suppliers such as dried grapes, sugar and the likes. The price of such inputs is prone to seasonal fluctuation and thus variable
2. The performance related incentive for employees for number of bottles of wine created, would be variable cost as it would vary with the no of bottles produced.
3. Discount allowed to distributors which varies based upon the number of bottles purchased by them.
4. Commission paid to wine salesperson which varies with respect to bottles sold.