Weaver Corporation has a three-year contract with a security firm that sets hourly wage rates for the firm at $10 per hour. At 7,000 units of output, factory security costs were $14,000. Production is expected to increase next year to a level of 10,000 units and the security costs are expected to remain the same. The security costs are an example of fixed factory costs.

Question

Quizplus · Accepted Answer

Fixed factory costs remain constant regardless of the level of production. In this case, the security costs remain the same at 7,000 units and are expected to remain the same at 10,000 units, making them an example of fixed factory costs.

Weaver Corporation Has a Three-Year Contract with a Security Firm