Question

In: Economics

Identify the following costs as being either variable or fixed in respect to volume or level...

Identify the following costs as being either variable or fixed in respect to volume or level of activity:

A. Rent on a factory building
B. Electricity for heating and cooling the factory building
C. Paint shop superintendent's salary
D. Lubricants used for machines
E. CPU chips used in notebook production
F. Electricity for operation of machines
G. RFID (Radio-frequency identification) units embedded in the final product during shipping
H. Sugar used in ice cream production
I. Janitorial and custodial salaries
J. Labor costs in assembling a product

Solutions

Expert Solution

Fixed cost refers to the cost that do not change with the level of output.

Variable cost refers to the cost that changes with the level of output.

A. Rent on a factory building

Rent does not change as the level of output changes.

So, it is a fixed cost.

B. Electricity for heating and cooling the factory building.

Electricity usage in this context does not depend on the level of output.

So, it is a fixed cost.

C. Paint shop superintendent's salary

Superintendent's salary does not depends on the paint jobs undertaken.

So, it is fixed cost.

D. Lubricants used for machines

The usage of lubricants depends on the number of machines operated.

So, it is a variable cost.

E. CPU chips used in notebook production

Number of CPU chips used depends on the number of notebook produced.

So, it is a variable cost.

F. Electricity for operation of machines

Number of hours for which machines are operated determines the usage of electricity.

So, it is a variable cost.

G. RFID (Radio-frequency identification) units embedded in the final product during shipping

Number of RFID units to be used depends on the number of final product shipped.

So, it is a variable cost.

H. Sugar used in ice cream production

Quantity of sugar used depends on the quantity of ice cream produced.

So, it is a variable cost.

I. Janitorial and custodial salaries

These salaries are not dependent on level of output.

So, it is a fixed cost.

J. Labor costs in assembling a product

Labor is a variable factor.

So, it is a variable cost.

Rahul Sunny answered 1 year ago

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