Water Works Plumbing Company Costs:

1. a) Gasoline expense for the service van: Variable Cost

• This expense directly varies with the amount of service calls the company performs. The more calls, the more miles driven, resulting in higher gasoline usage.

1. b) Cost of the owner’s time to run the plumbing business: Fixed Cost (Short-Term) & Quasi-Fixed Cost (Long-Term)

• In the short term, the owner’s time is likely a fixed cost as the business may not be able to function without them. However, in the long term, it could be considered quasi-fixed. If the business grows significantly, the owner might hire a manager, making their time a variable cost depending on their involvement.

1. c) Cost of a complete set of tools needed to be a plumber: Fixed Cost

• This is a one-time cost (or occasional replacement) and doesn’t fluctuate with the number of jobs performed.

1. d) Labor expense for an assistant plumber: Variable Cost

• The cost directly varies with the number of hours the assistant works. More hours equate to higher labor expense.

1. e) Monthly lease payment for a drain-line auger: Quasi-Fixed Cost

• The cost is fixed for a specific period (12 months) regardless of usage. However, unlike a true fixed cost, it can be changed in the long term by renegotiating the lease or not renewing it.

1. f) Expense for plumbing service consumables: Variable Cost

• These supplies are used up on each job, so the cost varies with the number of service calls performed.

Impact Industries Production Costs:

Shortcoming: The information provided is insufficient to definitively classify the costs as variable or fixed.

While the table shows optimal combinations of labor and capital for different output levels, it doesn’t reveal how these costs change with production changes.

Here’s a breakdown of possibilities:

• If Impact Industries can adjust labor and capital for each production level:
  • Labor Cost: Variable Cost (hiring/laying off workers)
  • Capital Cost: Variable Cost (renting/leasing additional equipment)
• If adjustments are not possible in the short term:
  • Labor Cost: Fixed Cost (committed workforce)
  • Capital Cost: Fixed Cost (existing equipment)

Without additional information on how Impact Industries adjusts its resource usage with production changes, a definitive classification isn’t possible.