Which of the following typically make up a significant portion of labor costs for firms?

• A. Depreciation of machinery
• B. Wages and salaries
• C. Interest payments on loans
• D. Employee benefits such as health insurance

Answer: (D)

Verified step by step guidance

1. Understand that labor costs for firms include all expenses related to employing workers, not just the direct wages and salaries paid to employees.
2. Identify the components of labor costs: primarily wages and salaries, which are the direct payments to employees for their work.
3. Recognize that employee benefits, such as health insurance, retirement contributions, and paid leave, also form a significant part of labor costs, as these are additional costs borne by the employer beyond direct pay.
4. Distinguish labor costs from other firm expenses like depreciation of machinery, which is a capital cost, and interest payments on loans, which are financial costs, neither of which are part of labor costs.
5. Conclude that the significant portions of labor costs typically include wages and salaries plus employee benefits, while depreciation and interest payments are not considered labor costs.