Suppose Sam's Shoe Co. makes one kind of shoe. An example of a variable cost for this company would be:
A)the design pattern for the shoes.
B)the leather needed to make the shoes.
C)the lease to the factory building.
D)All of these are examples of variable costs.

Question

Quizplus · Accepted Answer

Variable costs change with the level of production. The leather needed to make the shoes is a variable cost because the amount of leather used depends on the number of shoes produced. The design pattern is a fixed cost, as it does not change with the number of shoes made. The lease to the factory building is also a fixed cost, as it remains constant regardless of production levels.