Question

Grimaldi Chocolates projects its factory rent to be $8,000 in July when 4,000 pounds of candy are expected to be produced. If rent is a fixed cost, and if production is expected to increase to 6,000 units in August, what is the expected cost of rent in August

Answer 1

Answer:

$8,000

Explanation:

With regards to the above information, the expected cost of rent in August is $8,000. This is because the $8,000 is fixed in total.

We know that fixed costs are those costs that do not vary with the level of output. Invariably, it means they remained the same as activity level or output changes.

Although, production increases to 6,000 units in August from 4,000 candy pounds of candy that are expected to be produced in March, yet, the fixed cost of $8,000 would remain the same whether or not production increases or decreases.