Question

The monthly salary of a factory’s custodian, and the costs of raw materials are:

a.Variable and fixed costs, respectively (with respect to the production of units)

b. Fixed and variable costs, respectively (with respect to the production of units)

c.Both fixed costs (with respect to the production of units)

d. Both variable costs (with respect to the production of units)

e. None of the above

Please explain why

Answer 1

Production of units may change from month to month.

Monthly salary of a factory's custodian is a fixed amount. Thus, the salary amount per unit changes with the change in units of production. Hence, the monthly salary of a factory's custodian is variable with respect to production of units though it is a fixed cost when seen in total.

Cost of raw materials is directly linked to the number of units produced. They change with the change in the number of units produced but are constant per unit. Hence, they are fixed cost with respect to production of units though it is a variable cost when seen in total.

Therefore, the monthly salary of a factory's custodian and the costs of raw materials are Variable and Fixed costs respectivley with respect to the production units.

Hence. the answer is A.