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Fixed or variable costs

Identify the following costs as fixed or variable.

Costs related top plane trips between San Diego, California, and Orlando, Florida, follow. Pilots are paid on a per trip basis.
a. Pilots' salaries relative to the number of trips flown.
b. Depreciation relative to the number of planes in service. Cost of refreshment relative to the number of passengers.
c. Pilots' salaries relative to the number of passengers on a particular trip.
d. Cost of a maintenance check relative to the number of passengers on a particular trip.
e. Fuel costs relative to the number of trips.

National Union Bank operates several branch offices in grocery stores. Each branch employees a supervisor and two tellers.
f. Tellers' salaries relative to the number of transactions processed in a particular branch.
g. Supplies cost relative to the number of transactions processed in a particular branch.
h. Tellers' salaries relative to the number of customers served at a particular branch.
i. Supervisors' salaries relative to the number of branches operated.
j. Supervisors' salaries relative to the number of customers served in a particular branch.
k. Facility rental costs relative to the size of customer deposits.

Costs related to operating a fast-food restaurant follow.
l. Depreciation of equipment relative to the number of restaurants.
m. Building rental cost relative to the number of customers served in a particular restaurant.
n. Manager's salary of a particular restaurant relative to the number of employees.
o. Food cost relative to the number of customers.
p. Utility cost relative to the number of restaurants in operation.
q. Company president's salary relative to the number of restaurants in operation.
r. Land costs relative to the number of hamburgers sold at a particular restaurant.
s. Depreciation of equipment relative to the number of customers served at a particular restaurant.

Solution Preview

Identify the following costs as fixed or variable.

Costs are variable if they change with base and fixed if they do not change

Costs related to plane trips between San Diego, California, and Orlando, Florida, follow. Pilots are paid on a per trip basis.

a. Pilots' salaries relative to the number of trips flown.

Variable - since pilots are paid on a per trip basis, the cost will change with number of trips

b. Depreciation relative to the number of planes in service. Cost of refreshment relative to the number of passengers.

Variable - Depreciation is a cost related to each plane. As the number of planes change, depreciation will change
Variable - refreshment cost will change with number of passengers

c. Pilots' salaries relative to the number of passengers on a particular trip.

Fixed - salaries are paid on number of trips and so would not change with number of passengers

d. Cost of a maintenance check relative to the number of passengers on a ...

Solution Summary

The solution explains how to identify the given costs as fixed or variable

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