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 <u> 5 </u> 0 <u> 5</u>
1 <u> 5 </u> 6 <u> 11 </u>
2 <u> 5 </u> 9 <u> 14</u>
3 <u> 5 </u> 13 <u> 18</u>
4 <u> 5 </u> 18 <u> 23</u>
5 <u> 5 </u> 25 <u> 30</u>
6 <u> 5 </u> 34 <u> 39</u>
7 <u> 5 </u> 49 <u> 54</u>
8 <u> 5 </u> 68 <u> 73</u>
