Java Joe operates a chain of coffee shops.The company pays rent of $20,000 per year for each shop.Supplies (napkins,bags,and condiments)are purchased as needed.The manager of each shop is paid a salary of $3,000 per month,and all other employees are paid on an hourly basis.Relative to the number of customers for a shop,the cost of supplies is which kind of cost?
A) Fixed cost
B) Variable cost
C) Mixed cost
D) Relevant cost

Question

Quizplus · Accepted Answer

Variable costs are dependent on the level of activity, in this case, the number of customers for a shop. As the number of customers increases, the cost of supplies will also increase. Fixed costs, such as rent and the manager's salary, remain the same regardless of the level of activity. Mixed costs are a combination of fixed and variable costs, and relevant costs are costs that are specifically related to a decision or situation.

Java Joe Operates a Chain of Coffee Shops