Java Joe operates a chain of coffee shops. The company pays rent of $20,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The manager of each shop is paid a salary of $3,000 per month, and all other employees are paid on an hourly basis. Relative to the number of customers for a shop, the cost of supplies is which kind of cost?

a. Variable cost

b. Mixed cost

c. Relevant cost

d. Fixed cost

Question

Business

Dominic Silva

14 August, 13:10

Java Joe operates a chain of coffee shops. The company pays rent of $20,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The manager of each shop is paid a salary of $3,000 per month, and all other employees are paid on an hourly basis. Relative to the number of customers for a shop, the cost of supplies is which kind of cost?

a. Variable cost

b. Mixed cost

c. Relevant cost

d. Fixed cost

+4

Answers (1)

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Koch · Answer 1

a. Variable cost

Explanation:

Variable cost -

It refers to the amount of money which increases or decreases with the production output, is referred to as variable cost.

Variable cost is directly proportional to the production.

For example, the cost of raw material increases as the production of the output increases.

In numerical terms, the variable cost is the sum of the marginal cost over the total units.

The summation of the fixed cost and variable cost gives the total cost.

Hence, from the given scenario of the question,

The correct option is a. Variable cost.