marcella operates a small- but very successful art gallery- All but on.docx

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Marcella operates a small art gallery. All but one cost listed can be classified as a variable cost arising from inputs required to operate the business. The costs of purchasing art work to sell in the gallery is the exception, as it represents a sunk cost that was incurred initially to start the business. Variable costs included the physical gallery space, wages for employees, and accountant fees, as they depend on the level of business.

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marcella operates a small, but very successful art gallery. All but one of the following can be
classified as a variable cost arising from the physical inputs Marcella required to operate her
business. Which is it?
a) physical space for the gallery
b)wages paid to three part-time employees
c)accountants fees for preparing tax returns
d)costs of purchasing art work to sell in the gallery
Solution
There are 3 types of costs:
Variable costs are those costs which depend upon the output of production.
Costs which occur irrespective of the work being done are known as fixed costs.
Costs which are incurred once initially to start with the work are known as sunk costs.
Out of the given options:
a) Physical space for the gallery: Variable cost
b) Wages paid to three part-time employees: Variable cost
c) Accountants fees for preparing tax returns: Variable cost
d) Costs of purchasing art work to sell in the gallery: Sunk cost
Therefore, the correct option is (d) costs of purchasing art work to sell in the gallery .

marcella operates a small- but very successful art gallery- All but on.docx

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