Final answer:
The student's question involves understanding fixed and variable costs in the context of a sandals industry MSME in Jamaica, using an example from The Clip Joint barber shop to demonstrate how total costs are calculated and how they affect business strategy and planning.
Step-by-step explanation:
The student is asking about the concepts of fixed costs and variable costs in the context of a micro, small, and medium-sized enterprise (MSME) operating in the sandals industry in Jamaica. Total costs for any business are comprised of fixed costs, which do not vary with the level of production, such as rent and equipment, and variable costs, which do rise with increased production, such as labor and raw materials.
In the example of the barber shop, The Clip Joint, fixed costs amount to $160 per day, while variable costs are $80 per barber each day. The calculation of total costs is done by adding fixed and variable costs at each production level. For instance, if the shop hires two barbers, the total cost is calculated as follows: $160 (fixed costs) + (2 barbers × $80) = $320 (total costs).
Understanding the distinction between these costs is critical for MSMEs in Jamaica or elsewhere when assessing past performance and planning for future financial years. They play a pivotal role in pricing, budgeting, and overall business strategies, especially in the short run where fixed costs are considered sunk costs and should not affect future economic decisions.
Variable costs, however, are likely to show diminishing marginal returns, meaning the cost of producing extra units may increase after a certain level of output.
The complete question is: The amount for fixed and variable cost of a MSME sandals industry in Jamaica indicating what previous year was and future year will be is: