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Fixed and Variable Cost

  1. Apr 10, 2015 #1
    Hi! I'm having some trouble with this problem!

    A small convenience store pays $100 for a constant supply of shampoo bottles. 20 bottles are shipped to the small business. The convenience store then purchases 30 bottles of conditioner for $6 per bottle. What is the fixed and variable cost for the shampoo and conditioner bottles combined? The discount rate is 12%.

    I was thinking that the $100 was the fixed cost... but I feel like that isn't right. I'm not really sure where to start on this problem. Usually for these problems I put them into a graph in excel and just use y=mx+b to find the fixed and variable cost, but I'm not sure how to do that with this information. Also, is the discount rate important in this problem or was that thrown in there to confuse me?

    Thanks!
     
  2. jcsd
  3. Apr 10, 2015 #2

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    You are right. The fixed cost is $100 because it is a fixed $100 no matter how many bottles are shipped. The variable cost is the cost that is on a per-bottle basis.
     
  4. Apr 10, 2015 #3
    Ok, awesome! So to calculate the variable cost you just multiply the 30 bottles times $6 and then how do you take into account the shampoo bottles? Do you just divide the $100 by 20 to get the per bottle price of shampoo?
     
  5. Apr 10, 2015 #4

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    The problem seems unclear. It sounds like the $100 would buy as many shampoo bottles as needed. And what is the discount on? I agree that it might just be to confuse. Is there an example that you are supposed to mimic about these questions? I can't help any more. All I can say is that your understanding of fixed and variable seems correct.
     
  6. Apr 10, 2015 #5
    Right? Most of the questions in this class have been extremely unclear, its so frustrating. I don't have a sample question to look at unfortunately. Thanks so much for helping though, I feel better knowing someone agrees with my way of solving this!
     
  7. Apr 10, 2015 #6
    The cost of the shampoo is a fixed cost - x dollers get y shampoo bottles.
    Same is true of the conditioner bottles.
    I don't see what variable cost there is here or what discount has to do with it.
     
  8. Apr 10, 2015 #7
    Do you think this is just a trick question? Like there is no variable cost and the discount rate is just thrown in there for no reason?
     
  9. Apr 11, 2015 #8

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    The way the problem is stated: "30 bottles of conditioner for $6 per bottle" makes me think that the conditioner is meant to be a variable cost. Any cost that is a "per bottle" cost is variable with respect to the number of bottles bought. If all costs were really fixed, than the store should order a million bottles for that fixed cost and could sell them for pennies at a profit.
     
  10. Apr 11, 2015 #9
    Thanks! I guess I'll just say that the fixed cost is $100 and the variable cost is $180. Hopefully that is right!
     
  11. Apr 11, 2015 #10

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    Express the variable cost on a per/sale basis. fixed=$100; variable=$6/bottle. My guess is that the 12% discount should be applied to the $6 to get $5.28.
     
  12. Apr 11, 2015 #11
    Awesome idea!! I'll do that then, I really appreciate all the help!
     
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