Question 2

The following are costs incurred by a shoe manufacturer. Determine whether each one is a fixed cost or a variable cost or has some element of both.

(a) The cost of leather.

(b) The fee paid to an advertising agency

(c) Wear and tear on machinery.

(e) Electricity for heating and lighting.

(f) Electricity for running the machines.

(g) Basic minimum wages agreed with the union.

(h) Overtime pay.

Provide justifications for your answers. [35 marks]