Suppose Larry's Lariats Produces Lassos in a Factory, Using Nine

question 101

Multiple Choice

Suppose Larry's Lariats produces lassos in a factory, using nine feet of rope to make each lasso. The rope is put into a machine that automatically cuts it to the right length and seals the ends to prevent fraying. The rope is then hand tied, dipped, and wound before being placed in a packaging machine to prepare it for retail sale. Which of the following expenses would be considered a fixed cost for this company?

• A)Employee wages
• B)The cost of rope
• C)The packaging material
• D)None of these expenses are fixed costs.

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Definitions:

Limited Liability

A legal structure that limits the financial liability of an individual in a business to their investment in the company, protecting personal assets from business debts and obligations.

Personal Assets

Items of value owned by an individual, including both tangible assets like property and financial assets such as cash and stocks.

Corporate Stockholder

An individual or entity that owns shares in a corporation, thereby holding a portion of its equity.

Net Investment

The total investment in new capital minus depreciation on existing capital, measuring the growth in the stock of productive assets in an economy.