Suppose Bev's Bags makes large and small handbags. Bev rents an industrial space where she keeps the company's fabric, industrial sewing machine, measuring board, cutting shears, extra needles, thread, buttons, and labels. Bev can produce three bags an hour, regardless of the size of the bag. If Bev were to produce no bags, which of the following would be considered a variable cost?

Question

Quizplus · Accepted Answer

Variable costs change with production levels. If no bags are produced, costs like fabric (which directly vary with the number of bags made) are not incurred. Fixed costs, such as the sewing machine and measuring board, are incurred regardless of production levels. Therefore, if no bags are produced, there are no variable costs from the options provided.

Suppose Bev's Bags Makes Large and Small Handbags