ECONOMICS

Detailed explanation-1: -Wages paid to the factory labour are costs that are directly proportional to the level of production. If zero output is being produced then these costs do not have to be incurred. These costs vary with the level of output produced. Therefore, they are classified as variable costs.

Detailed explanation-2: -Wages paid to workers for their regular hours are a fixed cost. Any extra time they spend on the job is a variable cost.

Detailed explanation-3: -Examples of variable costs are raw materials, piece-rate labor, production supplies, commissions, delivery costs, packaging supplies, and credit card fees.

Detailed explanation-4: -Examples of variable costs are sales commissions, direct labor costs, cost of raw materials used in production, and utility costs.

Detailed explanation-5: -Labor costs are also classified as fixed costs or variable costs. For example, the cost of labor to run the machinery is a variable cost, which varies with the firm’s level of production. A firm can easily increase or decrease variable labor cost by increasing or decreasing production.