Which of the following is most likely to be a variable cost for a firm?
A) the interest payments made on loans
B) the franchiser's fee that a restaurant must pay to the national restaurant chain
C) the monthly rent on office space that it leased for a year
D) the payroll taxes that are paid on employee wages
E) the monthly insurance payment on the plant.
It refers to the cost that keeps changing with the level of output produced unlike the fixed cost which remains constant irrespective of the output produced. Some examples of variable cost include wages paid to labor, cost of other raw materials etc.
Answer and Explanation:
The correct option is (D) the payroll taxes that are paid on employee wages.
This is because wages paid to employees depend on the number of workers employed for producing a given level of output. As workers employed change, total wages change and thus the payroll tax paid on wages.
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from Financial Accounting: Help and ReviewChapter 13 / Lesson 5