Answer
Fixed cost are costs that are unable to be varied in the short run, while variable costs are costs that can be vaired both in the long and short run.
Fixed cost:
Interest on company issued bonds
Real estate taxes
Insurance premiums
Executive salaries
Advertising expenditure
Rental payments
Sales taxes
Depreciation
Shipping costs
Variable costs:
Fuel
Payment for raw materials
Work Step by Step
With regard to the given statement: Since the time period of a long run is defined to be period so long such as all costs of production can be varied, all costs would be able to be varied in the long run, given that the definition of the term ensures that the cost would be able to be varied in the long run.
For contract based employment and expenditure (insurance, salaries and advertisement), and fixed taxes such as sales tax, as well as fixed payments such as rentals and shipping and interests, due to the long term nature and the rigidity of the cost, they should br considered fixed costs.
For fuel and raw materials, the amount the company purchases can be varied in the short run, as no contracts are stated, and the storage life of these materials are very short, thus the companies are able to vary the quantity they buy quickly, as they have to purchase these materials many times a month.
