Cost considered as fixed costs in manufacturing industry is Raw material cost Labour cost Insurance cost Transportation cost
Question
Cost considered as fixed costs in manufacturing industry
- Raw material cost
- Labour cost
- Insurance cost
- Transportation cost
Solution
Fixed costs in the manufacturing industry are costs that do not change with the level of output. They are incurred even if the production is zero. Here are the costs you mentioned classified:
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Raw Material Cost: This is a variable cost. It changes with the level of output. The more you produce, the more raw material you need.
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Labour Cost: This can be both a fixed and variable cost. It is a fixed cost if you have salaried employees that get paid the same amount regardless of how much they produce. It is a variable cost if you pay workers based on how much they produce.
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Insurance Cost: This is a fixed cost. It does not change with the level of output. You have to pay the same amount of insurance whether you produce a lot or a little.
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Transportation Cost: This is typically a variable cost. It changes with the level of output. The more you produce, the more you need to transport. However, if you have a contract with a transportation company for a fixed amount per period, it could be considered a fixed cost.
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