Question

3. Label each of these costs as variable, fixed, or semi-variable. Please explain your choice.
4. If labeled as variable (or semi-variable) costs, identify the driver.

Cost items for a sports drink company:

• Product cost
• Carrying cost
• Flavor cost
• Vitamins cost
• Electrolytes cost
• Sale & marketing cost
• Price discount
• Brand equity an advertising
• Salaries
• Benefits & programs

Answer 1

ITEMS	TYPE OF COST
Product Cost	Product cost involves a number of cost that include both fixed and variable costs. For example Rent, Normal Profit, Depreciation etc. example of Fixed Cost and Veritable Costs are depend on Output. So we can say that it is a Semi-variable Cost.
Carrying Cost	It means cost incurred to carry the goods in your godown for storage. It is also known as holding cost. So we can say that it is totally a Variable Cost.
Flavor Cost	It is a Variable cost
Vitamins Cost	It is a Variable Cost
Electrolytes Cost	It is a Variable Cost but after some it remain constant doesn't matter how many units you produced.
Sales & Marketing Cost	Selling and Marketing expenses are categorized as indirect expenses on a company's income statement because they do not contribute directly of the making of a product or delivery of a services. Some component can change as sales volumes increase or decrease, while other remain stable. So Sale and Marketing cost are consider as Semi-Variable Cost.
Price Discount
Brand equity and Advertising	Brand Equity is a Cost of Brand it also indicates Brand Strength. But Advertising Cost is a Variable Cost.
Salaries	It is Fixed Cost. But other type of compensation, such as Commission or Overtime are Variable Costs.
Benefits & Programs