Question

Vipsana's Gyro House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a rent of $20 per day. Answer questions 17-10 accordingly.

Calculate Vipsana's variable cost per day when she produces 50 gyros using two workers?
A) $100 B) $124.40 C) $220 D) $240

Answer 1

C.) $220

Step-by-step explanation:

Variable costs change with changes in production volumes. In this case, the $2 cost of ingredients (pita, meat, spices, etc.) to make a gyro, is a variable cost. The more gyros made, the more the ingredients needed and the more the cost.

Rent is recurring cost and is fixed at $20 a day whether Vipsana sells gyros or not.

Two employees' wages will costs at $60 *2 = $120

So,

If 1 gyro = $2

then 50 gyros = ?

= 50 * 2

=100

Add $120 for the 2 employees;

=100 + 120 = $220

Therefore, to make 50 gyros and use 2 employees, Vipsana will incur $220 in variable costs.