Answer to question 1



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Answer to question 2)


  1. The payment he makes on his building insurance policy

Fixed cost. The reason is insurance policy is Simon’s obligation so that he has pay for it even if his pizza house produces more or less.

  1. The payment he makes to buy pizza dough

Variable cost. The reason is the amount of money spend for pizza dough is variable and depended on the quantity he produces.

  1. The wages he pays his workers

Variable cost. The reason is

  1. The lease payment he makes to the landlord who owns the building where his store is located

Fixed cost. The reason is the lease payment was made before he starts to produce products. So, it does not relate to the quantity of the product.

  1. The $300 per month payment he makes to his local newspaper for running his weekly advertisement

Fixed cost. The reason is that it is the additional cost of a marketing campaign that he runs and not related to the quantity of the product.

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