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3 years ago

Problem Set 3.2

History

1 answer:

djverab [1.8K]3 years ago

4 0

Answer:

Fixed costs do not change as a result of a change in the production amount but variable costs do. So long as the item changes as a result of production, it is a variable cost.

1. Rent ⇒ Fixed

Once rent is paid, it will not change regardless of the quantity produced.

2. Thread ⇒ Variable

In an apparel shop like this one, more thread is needed to produce more clothes so this is a variable cost.

3. Buttons ⇒ Variable.

More buttons are needed for more clothes to be made.

4. Wages ⇒ Variable

Wages will change if more clothes need to be produced.

5. Electricity ⇒ Variable

Cost will change if more clothes are manufactured because more electricity will be used.

6. Cloth ⇒Variable

7. Equipment Rent ⇒ Fixed

This will not change regardless of production level just like rent.

8. Shipping Costs ⇒ Variable Cost

More clothes means more shipping costs to transport them.

9. Insurance ⇒ Fixed cost

10. Property Taxes ⇒ Fixed cost

This does not change regardless of production level as it is based on the property, not production.

Production Fixed cost Variable Total

0 5 0 5

1 5 6 11

2 5 9 14

3 5 13 18

4 5 18 23

5 5 25 30

6 5 34 39

7 5 49 54

8 5 68 73

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