ECONOMICS

Detailed explanation-1: -The bakery’s fixed costs consist of rent, bakery equipment, taxes, insurance, and utilities. The bakery’s variable costs for making one loaf of bread are $1.80. These costs include bakery ingredients, marketing, and overhead. The bakery has a list price of $5 for each loaf of bread it sells.

Detailed explanation-2: -Let’s say you own a small bakery. Your monthly expenses include rent ($500), utilities ($200), flour ($100), sugar ($50), eggs ($20), and labor ($500). In this scenario, your rent, utilities, flour, sugar, and eggs would be considered variable costs because they fluctuate with production volume.

Detailed explanation-3: -Examples of Variable Costs Generally, a product’s direct materials are a variable cost. For example, if a bakery uses one pound of flour for every loaf of bread it produces, the flour is a variable cost. If the flour costs $0.40 per pound and no bread is produced, the total cost of flour will be $0.