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 $500 is a fixed cost per year. Which of the following is true?
A) Jamara will pay the Paint A Sign company $500 regardless of the number of parties she hosts.
B) Jamara will have to pay Paint A Sign $500 for every party she hosts.
C) Jamara will lose money if she has less than 100 participants a year.
D) Jamara's annual fixed costs will be higher than her variable costs regardless of the number of participants.

Question

Quizplus · Accepted Answer

A fixed cost is a cost that does not change with an increase or decrease in the amount of goods or services produced or sold. Since Jamara must pay $500 a year to be a representative for Paint A Sign, this cost remains the same regardless of the number of parties she hosts, making option A correct.

Jamara Has Started a Home Party Business That Hosts Parties