Explain the ideas of fixed costs, variable costs, and cost avoidance, and have the students complete the problems on the following pages. Fixed costs may include insurance, labor, rent, heat, telephone, taxes and advertising. Fixed costs remain unchanged, no matter how much business is done. Variable costs may include labor, electricity, gasoline and repairs. The longer you operate machinery, the more fuel or electricity it needs and the faster it wears out.
Variable costs rise and fall as business increases or decreases.
Doubling the number of pounds of cans processed has cut in half the fixed cost per pound, resulting in an increase in the amount of money available for variable cost and profit. Suppose variable costs added another 2 cents per pound of expenses. Recycling Economics Most recycling business expenses are fixed costs. These costs remain the same no matter how many pounds of cans the center collects per month. Other expenses depend on how many cans the center collects.