Subtopic: Cost analysis of implements and tractors
Question Statement:
In the economic cost analysis of agricultural tractors and machinery, which of the following costs are classified as FIXED (Ownership) costs?
Options:
(A) Depreciation of the machine
(B) Cost of fuel and lubricants consumed
(C) Interest on initial investment
(D) Insurance, taxes, and housing costs
Answer Key:
A, C, D
Step-by-Step Solution & Explanation
1. Fixed costs (ownership costs) occur regardless of whether the machine is used or stands idle: Depreciation, Interest on investment, Housing (shelter), Taxes, and Insurance.
2. Variable costs (operating costs) occur strictly proportional to the hours of operation: Fuel, Lubricants, Repair & maintenance, and Operator wages.
3. Hence options A, C, and D are Fixed costs, while B is an Operating (variable) cost.