An example of a cost that is variable with respect to the number of units produced and sold is:
A) insurance on the headquarters building.
B) power to run production equipment.
C) supervisory salaries.
D) depreciation of factory facilities.

Question

Quizplus · Accepted Answer

The cost of power to run production equipment is dependent on the number of units being produced and sold. The more units that are produced and sold, the more power that will be required to operate the equipment, and thus the greater the variable cost of power.

A, C, and D are examples of fixed costs, as they do not change with the level of production and sales. Insurance on the headquarters building is a fixed cost because the cost remains the same regardless of how many units are produced and sold. Similarly, supervisory salaries and depreciation of factory facilities are fixed costs that do not vary based on the level of production and sales.

An Example of a Cost That Is Variable with Respect