How do I determine which costs are Variable Costs from this list below? This dat

Question

How do I determine which costs are Variable Costs from this list below? This data is from an Escape Room business (entertainment venue).

Expenses Wage expense $ 38,049 Rent expense $ 12,895 Utilities expens $    2,560 Banking & CC fees $    1,749 Cleaning & Maintenance expense $    1,425 Office supplies expense $    1,145 Insurance expense $    1,195 Gas expense $    1,869 Web expense $        716 Incorporation expense $          57 Miscellaneous $    1,164 Photo expense $        102 Marketing & Promo expense $    1,491 Depreciation expense $    6,003

Explanation / Answer

Variable costs mean the costs which increase in a fixed ratio in proportion to the increase in activity level within an organization.

Accordingly, the following costs are variable costs in the list provided

Cleaning & Maintenance expenses

Office supplies expense

Gas Expense

Web expense

Photo Expense

Marketing & Promo expense

For e.g: For an entertainment expense if the sales increases ( activity increases) i.e more customers use the premises which shoot up the cleaning & maintenance expenses in proportion to an increase in sales ---i.e variable cost and same logic applies other costs as well

And If you look at depreciation expense it does not vary with the changes in sales i.e fixed

  

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