Suppose Larry's Lariats produces lassos in a factory,and uses nine feet of rope to make each lasso.The rope is put into a machine that automatically cuts it to the right length,then seals the ends to prevent fraying.The rope is then hand tied,dipped,and wound before being placed in a packaging machine to prepare it for retail sale.Which of the following would be considered a variable cost for this company?
A) The cost of the factory
B) Employee wages
C) The rope-cutting machine
D) All of these expenses would be included in variable costs.

Question

Quizplus · Accepted Answer

Employee wages would be considered a variable cost for Larry's Lariats because the more lassos they produce, the more employees they would need to pay to produce them. The cost of the factory would be a fixed cost because it is a one-time expense and does not change based on the number of lassos produced. The rope-cutting machine would also be a fixed cost because once it is purchased, its cost does not vary based on the number of lassos produced. Therefore, the correct answer is B.

Suppose Larry's Lariats Produces Lassos in a Factory,and Uses Nine