The following are some of the costs of a clothing manufacturer. State which among them will you consider as fixed cost?

Cost of cloth

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Wages paid to workers

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Depreciation on machines owing to time

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Cost of electricity for running machines

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Solution

The correct option is A Depreciation on machines owing to time
Fixed costs are the costs which are not related with the level of production, whereas, variable costs are directly related with the level of production. In this case, the depreciation charged on machinery remains same for years until and unless addition to machinery are made.

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