Question

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?

(A) The rent that the firm pays for office space in a suburb of St. Louis
(B) The cost of the steel that is used in producing automobiles
(C) The cost of internet advertising incurred each year
(D) The $20 million payment that the firm pays each year for accounting services

Answer 1

Answer:

B) The cost of the steel that is used in producing automobiles 

Explanation:

Variable costs are costs that vary with production .if production increases, variable cost increases and if production falls, variable cost falls.

The amount of Steel used depends on the amount of cars to be produced. Therefore ,the cost of steel is a variable cost.

Fixed cost are costs that don't vary with production. The other options are examples of fixed cost.

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