Question

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?

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.