Jim owns Nickelback Bar, dedicated to the rock band Nickelback. Jim pays his landlord, a strip mall, a $3,000 monthly rent. If Jim breaks the lease before the end of the calendar year, he is required to pay $2,000 for each of the remaining months. Jim just purchased $40,000 of Nickelback-themed bar fixtures; the fixtures have absolutely no value in any alternative use. Each weekend, Jim contracts with a security company that provides four security guards for a total of $1,200.
a. Is the $1,200 payment to the security firm a variable cost, sunk cost, or avoidable fixed cost? Explain your answer.
b. Suppose that at the end of August Jim permanently shuts down his bar. What are Jim's sunk costs?

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The Answer of Jim owns Nickelback Bar, dedicated to the rock band Nickelback. Jim pays his landlord, a strip mall, a $3,000 monthly rent. If Jim breaks the lease before the end of the calendar year, he is required to pay $2,000 for each of the remaining months. Jim just purchased $40,000 of Nickelback-themed bar fixtures; the fixtures have absolutely no value in any alternative use. Each weekend, Jim contracts with a security company that provides four security guards for a total of $1,200.
a. Is the $1,200 payment to the security firm a variable cost, sunk cost, or avoidable fixed cost? Explain your answer.
b. Suppose that at the end of August Jim permanently shuts down his bar. What are Jim's sunk costs?

Jim Owns Nickelback Bar, Dedicated to the Rock Band Nickelback