Final answer:
The total selling cost is the dependent component in the given scenario as it changes in response to the number of dispatches made or sales initiated. Fixed costs, while important to consider, remain constant and are independent of these activities.
Step-by-step explanation:
In analyzing the components of the given equation, the dependent component refers to the variable that depends on another variable within the context of the scenario. Considering basic principles of cost behavior, here are the components explained:
- Fixed cost (such as overhead) is a cost that remains constant, regardless of the level of output or activity. This is not dependent on the number of dispatches, sales, or selling cost. It's a constant amount.
- Number of dispatches made or number of sales initiated by representatives would typically be independent variables, as they are factors that can be controlled or managed to influence outcomes like total selling cost.
- The total selling cost is usually a dependent variable because it's affected by various factors such as the number of sales, production volume, and dispatches.
Within the given context, if we are relating costs to activities, then total selling cost would be the dependent component as it relies on other variables such as the number of dispatches made or the number of sales initiated by representatives. The equation would reflect this relationship, with the total selling cost changing in response to those independent variables.
Average fixed cost, mentioned in one of the exercises, is calculated by dividing fixed cost by the quantity of output produced. As output increases, average fixed cost decreases, illustrating the concept of spreading the overhead. This means that the fixed cost gets distributed across more units of output, reducing the cost per unit.