Costs classification - Week 8

X-ray film used in the radiology lab at Queens Medical Centre in Nottingham.​ Variable or fixed?

• Variable costs

• Fixed costs

• Semi-variable costs

• I don't know

Answer explanation

why?

-The higher the number of patients x-rayed, the more x-ray film is required to serve the patients.​

The costs of advertising a 1D concert in the O2 in London.​ Variable costs or fixed costs?

• Variable costs

• Fixed costs

• Semi-variable costs

• I don't care.

Answer explanation

Why

• The advertising cost is not related to the number of tickets sold to that concert. It makes no difference whether there are only 10 people attending it, or 30,000.​

Depreciation on the new venue of Costa Coffee in Greenwich Church Street.​ Variable or fixed?

• Fixed costs

• Variable costs

• Semi-variable costs

• Guess what?

Answer explanation

Why

• Depreciation depends on the investment into the new venue as well as the assumed useful life of the venue. It does not matter whether 10 or 10,000,000 customers are being served coffee and muffins, the depreciation would not change.​

The electrical costs of running a roller-coaster at Blackpool.​

• Variable costs

• Fixed costs

• Semi-variable costs

• I will not pay for it.

Answer explanation

Why?

• This depends on the exact tariff. Electrical costs are – as a utility cost - usually semi-variable, that means one part of the tariff is fixed and has to be paid no matter what (like a “service charge”), and another part depends on the electricity consumed. The more visitors ride the roller-coaster, the more electricity is necessary to run it.​

Property taxes on the Greenwich Picturehouse.​

• Variable costs

• Fixed costs

• Semi-variable costs

• I will wait for your answer, instead.

Answer explanation

why?

• The basis for property tax is the value of the taxed property and not the number of cinema goers.​

Commissions paid to a salesperson at Pearson.​

• Fixed costs

• Variable costs

• Not known

• Semi-variable costs

Answer explanation

Why?

• Commission is paid on the basis of number of copies of a textbook sold. If the salesperson sells no copy at all, there will be no commission cost to Pearson.​

Property insurance on the Meantime Brewery bottling plant.​

• Fixed costs

• Variable costs

• Semi-variable costs

• No idea.

Answer explanation

Why?

• Insurance cost does not depend on the number of bottles produced and sold. For insurance, factors like property location, reputation of insurance holder, security measures etc. influence the quoted premium.​

The costs of the retina display glass used to make the iPad Air 2.​

• Variable costs

• Variable costs

• Variable costs

• Fixed costs?

Answer explanation

Why?

• If no iPads would be produced, there would be no retina display glass required at all, thus no costs incurred. The retina displays are a good example for direct materials.​

The costs of shipping Sony Smart TV sets to retail shops.​

• Fixed costs

• Variable costs

• Semi-variable costs

• Don't choose me.

Answer explanation

Why?

• This answer highly depends on the definition of “shipping costs”. If transport costs are scrutinised, there are purely variable components like fuel (the more TV sets are shipped, the more fuel is needed) and fixed components like insurance or road tax.​

The cost of leasing an ultra-scan diagnostic machine at St Thomas’s hospital in London.​

• Variable costs

• Fixed costs

• Semi-variable costs

• ???

Answer explanation

Why?

• Leasing costs are like rent. It does not matter how many patients are scanned using this machine, the rent remains unaffected by it (contractual obligation).​