Distinguishing fixed vs. variable costs in production

Steps:

• Identify fixed costs: workshop purchase ($2000) and delivery vehicles ($2000 total), as these do not vary with output.
• Identify variable costs: materials ($7000) and piece-rate labor ($8000), as they depend on production volume.
• Sum variable costs: $7000 (materials) +$8000 (labor) = $15000.
• Exclude fixed costs from total variable calculation.

Why B is correct:

• Variable costs are expenses that fluctuate with production levels, per standard cost accounting; here, only materials and direct labor qualify, totaling $15,000.

Why the others are wrong:

• A: Includes only materials and vehicles, mistakenly treating vehicle purchase as variable.
• C: Adds all costs except workshop, incorrectly including fixed vehicle costs.
• D: Sums all expenses, conflating fixed and variable costs.

Final answer: B