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WedgeWelly has many variable costs when running the business - Edexcel - GCSE Business - Question 15 - 2016 - Paper 1
Question 15
WedgeWelly has many variable costs when running the business. Which one of the following is an example of a variable cost? Select one answer. A) Loan repayments B) ... show full transcript
Worked Solution & Example Answer:WedgeWelly has many variable costs when running the business - Edexcel - GCSE Business - Question 15 - 2016 - Paper 1
Step 1
Select one answer.
Answer
To determine a variable cost, we must understand that variable costs fluctuate with the level of output. In this case, we need to analyze the options:
- A) Loan repayments: Fixed costs, as they do not change with product output.
- B) Salaries: Typically considered fixed costs since most salaries are set regardless of output, although they may vary in some cases.
- C) Insurance: Also a fixed cost, usually paid per period, regardless of output.
- D) Raw materials: This option is a variable cost, as the cost of raw materials increases with higher production levels. Therefore, it's directly linked to the number of goods produced.
Considering the analysis above, the correct answer is D) Raw materials.