Cam Nat Enterprise: 2.1: Fixed and Variable Costs

Which of the following best describes a fixed cost in a business?

• A cost that changes with the level of output

• A cost that remains the same regardless of output

• A cost that only occurs when production stops

• A cost that is paid only once

Which of the following is an example of a variable cost?

• Rent for the factory

• Wages paid to workers per unit produced

• Insurance premium

• Business rates

What is the definition of variable costs?

• Costs that do not change with output

• Costs that change directly with the level of output

• Costs that are paid annually

• Costs that are only paid if the business makes a profit

Which of the following is NOT a fixed cost?

• Factory rent

• Raw materials

• Salaries of permanent staff

• Insurance

Which of the following is a fixed cost for a bakery?

• Flour used for baking

• Electricity used for ovens (if it increases with production)

• Monthly rent for the shop

• Packaging for each loaf sold

Which of the following is a variable cost for a car manufacturer?

• Depreciation of machinery

• Steel used to make cars

• Annual business licence fee

• Factory security

If a business pays £1,000 per month for rent, regardless of how much it produces, this is an example of:

• Variable cost

• Fixed cost

• Sunk cost

• Marginal cost

Which of the following would most likely be a variable cost for a café?

• Monthly rent

• Coffee beans used per cup sold

• Annual insurance

• Council tax

What is the formula for total cost?

• Total Cost = Fixed Cost + Variable Cost

• Total Cost = Fixed Cost × Variable Cost

• Total Cost = Variable Cost – Fixed Cost

• Total Cost = Fixed Cost ÷ Variable Cost

If a business produces 500 units, with a variable cost of £2 per unit, what is the total variable cost?

• £250

• £1,000

• £2,500

• £100