ACCA Applied Knowledge · Business and Technology · Microeconomic factors
A bakery rents its premises for a fixed monthly amount and pays its bakers by the hour for hours actually worked. In the short run, which of the following is a fixed cost of the bakery?
The monthly rent is the fixed cost. It stays the same regardless of how many loaves are produced in the short run, whereas flour, hourly-paid labour and packaging all vary directly with the volume of output and are variable costs.
- AThe monthly rent of the premisesCorrect
- BFlour used in production
- CHourly wages of bakers
- DPackaging for each loaf sold
Explanation
A fixed cost does not change with output in the short run. Rent stays the same whatever quantity is baked. Flour, hourly wages and packaging all rise as output rises, so they are variable costs.
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