The owner of a bakery must balance variable and fixed costs to maintain profitability. Which item is a fixed cost for the bakery?

Electricity costs are typically classified as variable costs because they fluctuate based on the amount of production. As the bakery increases production, electricity usage rises, resulting in higher costs. Consequently, these costs do not remain constant and cannot be categorized as fixed.

The cost of butter and eggs is also a variable expense since it changes with the level of production. As the bakery produces more goods, it requires more ingredients, leading to increased costs. This variability makes it unsuitable as a fixed cost.

Wages for hourly employees are classified as variable costs as well, as they depend on the number of hours worked, which can fluctuate based on production needs. When production increases, more hours may be required, resulting in higher wage expenses that vary with output levels.