Jamara has started a home party business that hosts parties and those attending paint signs. Jamara must pay $500 a year to be a representative for Paint A Sign. In addition, Jamara buys all the materials for the parties, including the metal base, the paints, brushes, stencils, and transfers. These items all add up to $10 on average. Jamara charges each participant $25 for each sign they make. For Jamara's Paint A Sign business, the $500 franchise fee is a:
A) fixed cost.
B) variable cost.
C) profit.
D) total cost.

Question

Quizplus · Accepted Answer

The $500 franchise fee is a fixed cost because it is a cost that does not change with the number of parties hosted or the number of participants in those parties. It is a one-time annual fee that Jamara must pay regardless of the business activity level.

Jamara Has Started a Home Party Business That Hosts Parties