Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio". Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open. Which of the following is true? A) The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost. B) The variable cost of running the studio is $22,000. C) The fixed cost of running the studio is $22,000. D) The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost.

Question

Business

Averi Barajas

19 June, 10:56

Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio". Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open. Which of the following is true? A) The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost. B) The variable cost of running the studio is $22,000. C) The fixed cost of running the studio is $22,000. D) The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost.

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Answers (1)

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Jacquelyn Cooley · Answer 1

The correct answer is option A.

Explanation:

Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio".

He needs an additional $12,000 per year to keep his studio open.

Here, the $10,000 spent on equipment is fixed costs. the additional amount of money required is the variable costs necessary to run business.

Fixed costs are the cost that remains constant for a time period irrespective of the level of output. The variable cost, on the other hand, varies with the level of output.