Question

A steel mill has fixed costs of $100 per hour and variable costs of $50 per hour. what will happen to these costs if the mill closes?

a. both fixed and variable costs will remain the same.
b. the mill will have no fixed costs or variable costs.
c. the fixed costs will decrease, but the variable costs will increase.
d. the variable costs will drop, but the fixed costs will stay the same.

Answer 1

The mill will have no fixed costs or variable costs

Explanation:

A steel mill has fixed costs of $100 per hour

A variable costs of $50 per hour.

We are supposed to find what will happen to these costs if the mill closes.

Since the mill gets closed

So, the mill will have no fixed costs or variable costs.

Hence the mill will have no fixed costs or variable costs when the mill closes

Answer 2

The fixed cost of the steel mill will not be affected with the mill closing. However, the variable cost is dependent on it. The answer to the question above is letter "D. The variable costs will drop, but the fixed costs will stay the same".