Question

Classified each of the following into fixed or variable cost (50 marks , marks each )...

Classified each of the following into fixed or variable cost (50 marks , marks each )

(interest , Rent , delivery , wages of part time staff , Raw materials , executive salaries , insurance commission on sales package , advertising )

Business   Economics   
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Answer #1

Sol :

Fixed cost is the cost which does not change with change in the output . It remains same as a whole.

Variable cost is the cost which does change with change in the the output . Per units variable cost remains constant.

So , following are classified as variable or fixed according to the above meanings of respective cost.

  • Interest - Fixed cost
  • Rent - Fixed cost
  • Delivery - variable cost (it increases, when sales increases or vice versa)
  • Wages of part time staff - Variable cost
  • Raw material - Variable cost
  • Executive salary - Fixed cost
  • Insurance commission - Variable cost
  • Advertising - Fixed cost.
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