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JOSLIN'S COSTS OF
DOING BUSINESS
After Joslin moved her business to a larger
store in the mall, Jane (her lawyer and largest stockholder) asked her
to list all the costs she had to pay for one month. Joslin's list
appears below. Study the list and indicate which costs are fixed
and which are variable by writing an F or V in the answer
space. If you think an item is a combination of fixed and variable
costs, write F/V in the space.
Illustration 20b
| Fixed or Variable? |
Item |
Costs for One Month |
| _____________________ |
Rent |
$
1,600.00 |
| _____________________ |
Utilities (electricity,
phone, and so forth) |
$
453.56 |
| _____________________ |
Insurance |
$
342.00 |
| _____________________ |
Lease payment for cash register |
$
88.50 |
| _____________________ |
Cost of goods sold |
$
8,600.00 |
| _____________________ |
Advertising fee paid to
the mall |
$
200.00 |
| _____________________ |
Joslin's salary (she has
hired no help) |
$
1,450.00 |
| _____________________ |
Cost of cleaning service
paid to the mall |
$
240.00 |
| _____________________ |
Paper, postage, and other
supplies |
$
143.39 |
| _____________________ |
Depreciation on investment
in equipment |
$
245.00 |
|
|
$
13,362.45 |
Answer the following questions about Joslin's
costs.
1. Are most of Joslin's costs fixed
or variable?
_____________________
2. Joslin sold 1,200 bags at $10
each. How much money did she earn from sales? ___________________
3. Did the business earn a profit
or suffer a loss for the month?
_____________________
4. How large was the profit or loss? ___________________
5. Do you think the business will
have larger costs in the future? Explain why or why not.
_______________________________________________________________________________
6. Should Joslin consider offering
a wider line of products in the store? Explain why or why not.
_______________________________________________________________________________
_______________________________________________________________________________
7. What else might Joslin do to improve
her profit?
_______________________________________________________________________________
_______________________________________________________________________________
©
National Council on Economic Education, New York, NY
Entrepreneurship in the U.S. Economy, Lesson 20
Entreprenuers Control Costs: Economics Lesson
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