Suppose Larry's Lariats produces lassos in a factory, using nine feet of rope to make each lasso. The rope is put into a machine that automatically cuts it to the right length and seals the ends to prevent fraying. The rope is then hand tied, dipped, and wound before being placed in a packaging machine to prepare it for retail sale. Which of the following expenses would be considered a fixed cost for this company? A)Employee wages B)The cost of rope C)The packaging material D)None of these expenses are fixed costs.

Question

Quizplus · Accepted Answer

Fixed costs are expenses that do not change with the level of production or sales, such as rent, salaries of permanent staff, or depreciation of equipment. Employee wages (if based on production), the cost of rope, and packaging material are variable costs, as they change with the level of production.

Suppose Larry's Lariats Produces Lassos in a Factory, Using Nine