The costs of doing business for a company can be found by adding fixed costs, such as rent, insurance, and wages, and variable costs, which are the costs to purchase the product you are selling. The portion of the company's fixed costs allotted to this product is $400, and the supplier's cost for materials is $4 each. Let x represent the number of product boxes.

This is a lesson in fixed vs. variable costs. Fixed costs remain constant as the number of product is produced. Variable costs are dependent on the number of product produced. In this example, they are telling you that $400 is the amount of fixed costs allocated to this product, so it sounds like they produce more than one type of product. The variable costs are $4 per box. We don't know the number of boxes produced.

A couple of examples:

If 100 boxes are produced, the cost is 100x + $400. If 200 boxes are produced, the cost is 200x + $400.

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