Cost of Berva\'s bakery Berva decides to open a bakery since it has always been
ID: 1099525 • Letter: C
Question
Cost of Berva's bakery Berva decides to open a bakery since it has always been her dream to own a business. To do this, she leaves her current job at Momma's Bakery, which pays a salary of $180 per day. To start her business, Berva needs store space, an oven, and raw ingredients. She rents a store with an oven for one year. The owner of the store requires Berva to pay $60 per day. If she so decides, Berva can sublet the lease to another business and stop paying rent. Berva also purchases $1 of raw ingredients for every baked good she makes. What is Berva's fixed cost What is Berva's variable cost? What is Berva's opportunity costExplanation / Answer
a) Berva's fixed cost = $60
b) Variable Cost = $1
opportunity cost = $180
NOTE:
Fixed Costs are expenses that don't change based on production or sales volumes. They include salaries, rent, insurance, accountancy costs.
Variable Costs are expenses that vary based on production volumes. They include material, labor, utilities, and delivery costs
Oppotunity costs are what you could have done instead of doing what you did.