Purchase of lumber to be cut into boards is a variable or fi

Purchase of lumber to be cut into boards is a variable or fixed cost?

Solution

Answer

It is a Variable cost, as Variable cost is the cost which increased or decreases with the Production and Fixed Cost is the cost which is fixed in nature irrespective of change in production.

So Assume if we want to produce more boards then we need Extra Lumber and Vice versa, so with change in production the no. of Purchased Lumber will also change, so its a Variable Cost.