Which of the following is an example of a variable cost for an amusement park?

• A. Wages paid to ride operators based on the number of hours worked
• B. Depreciation expense on amusement park rides
• C. Annual property insurance premiums
• D. Monthly salary of the park manager

Answer: (A)

Verified step by step guidance

1. Understand the concept of variable costs: Variable costs are expenses that change in proportion to the level of activity or output. In this case, the activity is related to the operations of the amusement park.
2. Analyze each option provided in the problem: Determine whether each cost changes based on the level of activity or remains fixed regardless of activity levels.
3. Option 1: 'Wages paid to ride operators based on the number of hours worked' - This is a variable cost because the wages depend on the number of hours worked, which can vary based on park activity.
4. Option 2: 'Depreciation expense on amusement park rides' - Depreciation is a fixed cost because it does not change with the level of activity; it is based on the allocation of the asset's cost over time.
5. Option 3: 'Annual property insurance premiums' and Option 4: 'Monthly salary of the park manager' - Both are fixed costs because they do not fluctuate with the level of activity or output in the park.