Question

Explain which of the following is a fixed cost or a variable cost for General Motors. a) The cost of aluminum used for its automobiles b) The property taxes on its Bowling Green, Kentucky assembly plant c) The cost of labor for its assembly line workers. d) The yearly payments for naming rights for the General Motors Centre sports arena in Oshawa, Ontario, Canada. e) The salary paid to Mary Barra, the Chief Executive Officer of General Motors. f) The cost of tires it purchases from Goodyear for its trucks and SUVs

Answer 1

a) The cost of aluminum used for its automobiles (variable costs - because there is a specific unit and quality of aluminium used per car)

b) The property taxes on its Bowling Green, Kentucky assembly plant (Fixed costs - the business is expected to pay irrespective of sales)

c) The cost of labor for its assembly line workers. (Variable costs - because it can be pre-planned at a certain labor costs per labour hour)

d) The yearly payments for naming rights for the General Motors Centre sports arena in Oshawa, Ontario, Canada. (Fixed costs - the business is expected to pay irrespective of sales)

(E) The salary paid to Mary Barra, the Chief Executive Officer of General Motors(Fixed costs - the business is expected to pay irrespective of sales)

f) The cost of tires it purchases from Goodyear for its trucks and SUVs (variable costs - it can be easily varied by unit of car)