The Palace Confectionary Co is a small business located in the northeastern United States. The owner of Palace Confectionary is calculating the projected costs for the coming year. There is rent for the building; salaries for the retail employees; raw materials of sugar, chocolate, and other ingredients; wrappers for packaging of individual pieces of candy; boxes; and radio advertising. Palace's ______ are most likely to be the raw materials of sugar, chocolate, and other ingredients, as well as the wrappers.
A)sunk costs
B)variable costs
C)direct costs
D)fixed costs
E)marginal costs

Question

Quizplus · Accepted Answer

The raw materials such as sugar, chocolate, and other ingredients, as well as the wrappers, are most likely to be variable costs, as they vary based on the amount of candy produced. Salaries for retail employees and radio advertising costs could also be variable costs if they vary based on sales volume. Rent for the building and boxes are more likely to be fixed costs, as they do not vary with production levels. Sunk costs are costs that have already been incurred and cannot be recovered; marginal costs refer to the cost of producing one additional unit of a product. Direct costs are costs that are directly traceable to a specific product or service.

The Palace Confectionary Co Is a Small Business Located in the Northeastern