Hi Friends Please answer these
For company making frozen pizzas:
Q1. How refrigerant used in refrigerator equipment is variable cost?
Q2. What are Janitorial costs and why are they fixed cost?
Q3. How property tax is fixed cost?
Q4. How electricity cost is variable cost?
Q5. How Straight line depreciation is fixed cost?
Q6. How salary of plant manager is fixed cost?
Please explain me these concept?
1. Since the company makes frozen pizza, the amount of refrigerant which is use in freezers/refrigerators would vary with the volume. The more production, more the requirement. Hence Variable.
2. Janitorial Costs are costs for cleaning and maintenance of a building/office. The amount paid towards these would be fixed irrespective of level of activity. Hence Fixed.
3- Property Tax - The tax has to be paid irrespective of the level of activity and the amount of tax is fixed in nature. The tax wont change with change in production. Hence fixed.
4. Electricity - The consumption of electricity depends on the units produced and will vary with level of production - Hence Variable.
Similar logic can be applied to 5&6 as well.
CAclubindia
