Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory, the firm's employees use raw milk and sugar. The firm runs on electricity and purchases raw milk every day. Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream. Based on this scenario, can you identify the fixed costs for Amul Food Factory?

Question

Quizplus · Accepted Answer

Fixed costs are expenses that do not change regardless of the production level. In the scenario, the cost of building the factory, purchasing the robotic assembly lines, and industrial freezers are fixed costs because they do not change whether the Amul Food Factory produces a large or small number of ice cream containers. The cost of raw milk, sugar, and electricity are variable costs because they change depending on the production level of the factory. The cost of employees hired and the number of packages purchased are also variable costs.

Amul Food Factory in India Makes Ice Cream and Produces