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I will explain which one of these costs is fixed and which one is the variable. Then I will provide the cost per unit for each and along with that provide the total annual and unit costs of each when the sales volume increases. Following that I conclude with my own thoughts and views.
Fixed Cost and Variable Cost
The building rent cost is the fixed cost. Reason being is because the total annual cost of $9,000 for rent is not affected by the number of hamburgers produced. According to Horngren, Sundem, and Stratton (2005), "Even within the relevant range, the fixed cost remains fixed only over a given period of time?usually the budget period...
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