Question

Sonia opened a yoga studio where she teaches classes and sells yoga clothing. Variable costs for Sonia's yoga studio include the cost of the (i) tank tops. (ii) wages paid to the other yoga instructors. (iii) lease on the studio space. (iv) insurance that the landlord requires Sonia to carry for the studio. a. (i) only b. (i) and (ii) only c. (iii) and (iv) only d. (i), (ii), (iii), and (iv)

Answer 1

Answer:

B. (i) and (ii) only

Explanation:

A variable cost is a corporate expense that changes in proportion to production output. Variable costs increase or decrease depending on a company's production volume; they rise as production increases and fall as production decreases. Examples of variable costs include the costs of raw materials and packaging.

In Sonia's yoga studio, the only costs that change as the quantity of the good or service of the business produces changes are :

1. Tank tops

2. Wages paid to the other yoga instructors.

These two costs can change as business becomes bigger and expands.

Answer 2

Answer:

B) (i) and (ii)

Explanation:

Variable costs are costs that vary when the total output of the company varies. In this case, Sonia must pay the lease and the insurance regardless of how many yoga students she has.

But the cost of tank tops varies depending on how many tank tops she sells to her students or yogis. Until sold, the clothes are part of the inventory, and after they are sold you record their COGS.

Additional instructors can also be fixed or variable costs:

• if they are paid a % of what the yogis pay for the classes, then they are variable costs
• if they are paid a monthly salary, then they are a fixed cost
• or they might even be a mixed cost, with a low monthly salary and a % depending on the number of students