An example of a cost that is variable with respect to the number of units produced 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

Power required to run production equipment varies with the number of units produced. As production increases, more power will be required to operate the equipment, and vice versa.

Option A (insurance on the headquarters building) is a fixed cost since it remains constant regardless of the number of units produced.

Option C (supervisory salaries) may also be fixed if the number of supervisors remains the same, regardless of production levels.

Option D (depreciation of factory facilities) is a fixed cost since it is based on the original cost of the facilities and is spread out over time. It does not vary with the number of units produced.

An Example of a Cost That Is Variable with Respect