Mug Shots operates a chain of coffee shops. The company pays rent of $15,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The managers of each shop are paid a salary of $2,500 per month and all other employees are paid on an hourly basis. The cost of rent relative to the number of customers in a particular shop and relative to the number of customers in the entire chain of shops is which kind of cost, respectively?
A) Variable cost/fixed cost
B) Fixed cost/fixed cost
C) Fixed cost/variable cost
D) Variable cost/variable cost

Question

Quizplus · Accepted Answer

Rent is a fixed cost because it does not change with the number of customers. The cost of supplies is a variable cost because it changes with the number of customers.

Mug Shots Operates a Chain of Coffee Shops