Read the passage carefully and answer the questions based on the passage:
Macroeconomic Variables
Akriti Manufacturing Company produces flower vases. The cost of production for 100 vase includes rent of Rs. 10,000, salary for permanent staff of Rs. 10,000, cost of Labour Rs. 12,000 and Raw material of Rs. 18,000. Due to increased demand of vases the company plans to increase production to 200 vases. The variable cost per vase remains Rs. 300 and the fixed cost does not change.
What is the fixed cost for producing 200 vases?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 20,000
Fixed cost refers to the cost that does not change with the level of output. According to the passage, fixed costs include:
-
Rent = 10,000
-
Salary for permanent staff = 10,000
So,
Fixed cost = 10,000 + 10,000 = 20,000
Since the fixed cost does not change even when production increases to 200 vases, it remains 20,000.