Pete\'s Pizza Place wishes to determine which of its costs will vary with the nu

Question

Pete's Pizza Place wishes to determine which of its costs will vary with the number of pizzas made. The Pizza Place has four pizza makers and ten other employees who take orders from customers and perform other tasks. The four pizza makers and the other employees are paid an hourly wage. How would one classify (1) the wages paid to the pizza makers and other employees and (2) materials (e.g., cheeses, sauce, etc.) used to make the pizza? The employees’ wages would be considered a ______, while the materials to make the pizza are a ______.

a.fixed cost; fixed cost
b.fixed cost; variable cost
c. variable cost; fixed cost
d. variable cost; variable cost
e.mixed cost; mixed cost

Explanation / Answer

Correct option (d).

The higher the number of pizzas made, the more the number f employees required to prepare & serve them to customers, so these are variable costs.

The higher the number of pizzas made, the higher the cost of materials, so they also are variable costs.

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