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A pizza delivery firm must cover both its fixed costs and its variable costs in the long run - Leaving Cert Economics - Question 9 - 2019
Question 9
A pizza delivery firm must cover both its fixed costs and its variable costs in the long run. (a) Explain what is meant by fixed costs and state one example of a fi... show full transcript
Worked Solution & Example Answer:A pizza delivery firm must cover both its fixed costs and its variable costs in the long run - Leaving Cert Economics - Question 9 - 2019
Step 1
Explain what is meant by fixed costs and state one example of a fixed cost for a pizza delivery firm.
Answer
Fixed Costs are expenses that do not change regardless of the level of production or output. For a pizza delivery firm, these costs remain consistent even if no pizzas are sold.
Example: Rent of the premises where the pizza firm operates or insurance costs.
Step 2
Explain what is meant by variable costs and state one example of a variable cost for a pizza delivery firm.
Answer
Variable Costs are expenses that fluctuate based on the level of production. These costs increase as more pizzas are made and sold.
Example: The cost of ingredients like flour and cheese used to make the pizzas or wages that are paid based on the number of hours worked by delivery staff.