ECONOMICS
SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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fixed costs depend on outside forces; variable costs depend on internal forces
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fixed costs remain the same; variable costs are determined by fixed costs
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fixed costs remain the same; variable costs depend on how much is produced
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fixed costs are always law; variable costs are always high
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Detailed explanation-1: -Fixed cost decreases with an increase in the number of units produced. Variable cost remains the same irrespective of the number of units produced. Higher production results in reducing the costs and increasing the profits. There is no impact on profit with the level of production.
Detailed explanation-2: -Variable costs change based on the amount of output produced. Variable costs may include labor, commissions, and raw materials. Fixed costs remain the same regardless of production output. Fixed costs may include lease and rental payments, insurance, and interest payments.
Detailed explanation-3: -The cost which remains same, regardless of the volume produced, is known as fixed cost. The cost which changes with the change in output is considered as a variable cost. Fixed costs are definite, they are incurred whether the units are produced or not. Variable costs are incurred only when the units are produced.
Detailed explanation-4: -In accounting, fixed costs are expenses that remain constant for a period of time irrespective of the level of outputs. Variable costs are expenses that change directly and proportionally to the changes in business activity level or volume. Even if the output is nil, fixed costs are incurred.
Detailed explanation-5: -As cost accounting helps differentiate fixed and variable expenses, it helps the company make better financial decisions. Management can decide the product price as per the cost incurred in producing the item.