Company XYZ makes insect repellent and pays $3000 for rent, $32,000 for raw materials, $70,000 for salaries, $12,000 for depreciation and $15,000 for spray bottles. Variable costs are

Question

Quizplus · Accepted Answer

Variable costs are the costs that vary with the level of production. In this case, the only expense that varies with the level of production is the cost of spray bottles, which is $15,000. Therefore, the total variable cost is $15,000.

The fixed costs are the costs that do not vary with the level of production. In this case, the fixed costs are:

- Rent: $3,000
- Raw materials: $32,000
- Salaries: $70,000
- Depreciation: $12,000

The total fixed costs are $117,000.

Therefore, the total cost (fixed costs + variable costs) is:

$117,000 (fixed costs) + $15,000 (variable costs) = $132,000

So, the best choice is B) $47,000, which is the only variable cost.

Company XYZ Makes Insect Repellent and Pays $3000 for Rent