Maddie Noticed That Many Students on Campus Had T-Shirts and Sweatshirts

question 53

Multiple Choice

Maddie noticed that many students on campus had t-shirts and sweatshirts with Greek organization letters or club names on them. Recognizing that there was a huge market for this attire, Maddie rented a store front and a silk screening machine to get into the t-shirt business. Maddie's rent is $1,000 a month, including utilities. The silk screen machine leases for $300 a month. Maddie can buy blank t-shirts for $6 each and sweatshirts for $10 each. Maddie calculated the cost of materials for the silk screening at $2 per unit. For pricing decisions, Maddie should consider her $300 lease on the machine as a:

• A) fixed cost.
• B) variable cost.
• C) semi-variable cost.
• D) loss.

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Definitions:

23andMe

A personal genomics and biotechnology company that provides direct-to-consumer genetic testing services.

CVP

An acronym for Cost-Volume-Profit analysis, a financial tool used to determine how changes in costs and volume affect a company's operating income and net income.

Basal Metabolism

The rate at which the body uses energy while at rest to maintain vital functions such as breathing and keeping warm.

Body Fat

The energy-storing tissue in the body comprised of cells containing stored fat.