Everything Looks Like a Nail, Inc. is a manufacturing company that produces hammers. The company faces a number of different fixed and variable costs. Classify each as a fixed cost or variable cost.

-Regulatory compliance costs

-Salaries of top management and key personnel

-Cost of metal used in manufacturing

-Cost of wood used in manufacturing

-Mortgage payments

-Industrial equipment costs

-Interest on debt

-Postage and packaging costs

Fixed cost: Interest on debt, Regulatory compliance costs, Salaries of top management and key personnel, Mortgage payments, Industrial equipment costs

Variable cost: Cost of metal used in manufacturing, Cost of wood used in manufacturing, Postage and packaging costs

Explanation:

Fixed cost (indirect cost or overheads) are costs that are not dependent on the amount of goods and services provided by a business. They are normally time related such as rents, interests and so on

Variable are costs that vary with the amount of goods and services provided by a business such as the cost for supplies and parts, indirect cost.

Examples are:

Fixed cost: Interest on debt, Regulatory compliance costs, Salaries of top management and key personnel, Mortgage payments, Industrial equipment costs Variable cost: Cost of metal used in manufacturing, Cost of wood used in manufacturing, Postage and packaging costs