Chapter 18, Problem 3QS

To determine

Introduction:

Fixed and variable costs:

Fixed costs are costs that remains constant and do not fluctuate with the change in activity volumes or production. The increase or decrease in activity volume or production does not impact the cost as the fixed cost is associated with the product. Indirect costs and factory overheads are included in fixed costs.

Variable costs are costs that fluctuates with the activity volume or production. The cost varies with the level of change in activity volume or production. Increase in activity or production leads to increase in total costs and decreased activity or production leads to reduction in total costs. Examples of variable costs include wages paid to labor, sales commission etc. Variable costs are helpful in decision-making process by managers in production process.

To state:

The classification of cost whether variable or fixed based on the description of product costs for the production of footballs.