Question

For Jill​ Johnson's pizza​ restaurant, explain whether each of the following is a fixed or variable cost.The payment she makes on her fire insurance policy is aThe payment she makes to buy pizza dough is aThe wages she pays her workers is aThe lease payment she makes to her landlord who owns the building where her store is located is aThe​ $300-per-month payment she makes to her local newspaper for running her weekly advertisements is a

Answer 1

Answer: These can be explained as follows :-

Explanation: Costs which changes with the change in level of output is called variable cost and the cost which remain fixed at every level of output is called fixed cost. Therefore :-

A. Payment of fire insurance is a fixed cost as it will remain same at all levels.

B. Requirement of dough will increase with the increase in sales hence it is a variable cost.

C. Workers wages will remain same even if there is no sale hence it is a fixed cost.

D. She has to make lease payment irrespective of output hence it is a fixed cost.

E. Weekly payment to newspaper is not affected by the level of sales hence it is a fixed cost.