Problem Set 3.2 Daphne's Apparel Shop
Classify the following as Fixed Costs or Variable Costs for Daphne's Apparel Shop, a clothing
manufacturer:
FIXED COSTS
VARIABLE COSTS
COSTS
1. Rent
2. Thread
3. Buttons
4. Wages
5. Electricity
6. Cloth
7. Equipment Rent
8. Shipping Costs
9. Insurance
10. Property Taxes

Fixed costs do not change as a result of a change in the production amount but variable costs do. So long as the item changes as a result of production, it is a variable cost.

1. Rent ⇒ Fixed

Once rent is paid, it will not change regardless of the quantity produced.

2. Thread ⇒ Variable

In an apparel shop like this one, more thread is needed to produce more clothes so this is a variable cost.

3. Buttons ⇒ Variable.

More buttons are needed for more clothes to be made.

4. Wages ⇒ Variable

Wages will change if more clothes need to be produced.

5. Electricity ⇒ Variable

Cost will change if more clothes are manufactured because more electricity will be used.

6. Cloth ⇒Variable

7. Equipment Rent ⇒ Fixed

This will not change regardless of production level just like rent.

8. Shipping Costs ⇒ Variable Cost

More clothes means more shipping costs to transport them.

9. Insurance ⇒ Fixed cost

10. Property Taxes ⇒ Fixed cost

This does not change regardless of production level as it is based on the property, not production.  

Production                Fixed cost                       Variable                  Total

0                                      5                                    0                              5

1                                       5                                    6                             11  

2                                       5                                   9                               14

3                                       5                                  13                            18

4                                       5                                   18                            23

5                                       5                                  25                            30

6                                      5                                  34                               39

7                                      5                                   49                              54

8                                      5                                   68                              73

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