Question

on Chapter 7 Problem 12 P solution, shouldn't commissions and royalties paid also be figured into variable costs?

Answer 1

Commissions and royalties paid can also be figured into variable costs but basically they are fixed costs.

Explanation

Commissions and royalties paid cannot be figured as variable costs. The reason behind this is that these costs can be fixed, as these costs can be pre-decided and does not changes with the change in sales.

It is upon the company that how it treats commissions and royalties but basically they should be treated as fixed costs.

Variable costs are those costs which changes according to sales/production levels.
Now, at some level commissions and royalties can be treated as variable costs, if they are considered with the sales. They will change with the change in level of sales.