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. Currently, 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 $10 cost of materials is a:
A) variable cost.
B) fixed cost.
C) loss.
D) total cost.

Question

Quizplus · Accepted Answer

The $10 cost of materials is a variable cost because it changes with the number of participants or signs made. Fixed costs, like the $500 yearly fee, do not vary with the volume of business activity.

Jamara Has Started a Home Party Business That Hosts Parties