Question

ABC company prepares tax returns. ABC has one accountant paid an annual salary of 87,000 in...

ABC company prepares tax returns. ABC has one accountant paid an annual salary of 87,000 in one year, the accountant can complete a maximum of 1000 tax returns. What is the total labor cost if the accountant prepares 200 returns this year?

Homework Answers

Answer #1

Answer

Total labor cost = $ 87,000

Explanation:

Fixed cost refers to that type of cost which remains constant irrespective of the level of production.

Example: Rent, Salary, Insurance, etc.

In this case, salary is fixed cost and total labor cost will be $ 87,000 irrespective of number of returns prepared.

In simple words, think like this: Whether the accountant prepares 100 turns or 200 returns or 1,000 returns, what salary will he be paid?

The answer will be $ 87,000.

In case of any doubt, please comment.

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