Asked by Marijsha McNeal on Sep 26, 2024
Verified
Fixed costs are a function of ____, and variable costs are a function of ____.
A) productivity; economy
B) economy; time
C) management; time
D) management; productivity
E) time; volume
Variable Costs
Costs that change in proportion to the level of output or activity in a business.
Fixed Costs
Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums, remaining constant regardless of business activity levels.
- Understand the definitions and calculations of fixed and variable costs.
Verified Answer
CF
Collin Floyd3 days ago
Final Answer :
E
Explanation :
Fixed costs are independent of the volume of production or sales and remain constant over time. They are incurred regardless of the level of output. Examples of fixed costs include rent, salaries, and insurance. On the other hand, variable costs depend on the volume of production or sales and increase or decrease with changes in output. Examples of variable costs include the cost of raw materials, direct labor, and sales commissions. Therefore, fixed costs are a function of time (they are incurred over a specific period), while variable costs are a function of the volume of output. Hence, option E is the correct choice.
Learning Objectives
- Understand the definitions and calculations of fixed and variable costs.