Question

Suppose Larry's Lariats produces lassos in a factory, and uses nine feet of rope to make each lasso. The rope is put into a machine that automatically cuts it to the right length, then seals the ends to prevent fraying. The rope is then hand tied, dipped, and wound before being placed in a packaging machine to prepare it for retail sale. Which of the following would be considered a fixed cost for this company?
A. Employee wages
B. The rope-cutting machine
C. The cost of the factory
D. All of these expenses would be included in variable costs.

Answer 1

Answer: The cost of the factory and The rope-cutting machine.

Explanation:

A fixed costs is a type of cost that does not depend on the production level. It does not vary with the amount oof goods or services that are produced by the company.

In this case, the cost of the factory is the fixed cost as it won't vary with the production level. Also, the rope cutting machine is s fixed cost. The employee wages is a variable cost as the.wages received will depend on the amount of goods produced.