Question

1. The local government is running a flu vaccination program. Are the following costs fixed, variable, or step costs?

(a)    Costs of occupancy

(b)    Costs of management

(c)    Costs of part-time employee salaries based on service volume

(d)    Costs of vaccine consumed

Answer 1

Variable cost varies with sales volume that is with increase or decrease in sales volume ,variable cost changes.

Fixed cost Remain constant within a relevant range of output. Step fixed cost are those cost which does not change within the threshold limit provided but changes after that limit.

	Nature	Reason
cost of occupancy `	Step cost	This cost remain constant for the space taken .However if occupancy increases then it will increase for additional space undertaken
Costs of management	Fixed cost	This cost remain constant irrespective of volume .
Costs of part-time employee salaries based on service volume	variable`	changes with change in servie volume
Costs of vaccine consumed	variable	changes with vaccine provided.