Final answer:
The subject of this question is Business and the grade level is High School. The business management question focuses on fixed and variable costs for making business operational decisions. It exemplifies with cases where a center earns revenues and how it affects the decision to continue or cease business.
Step-by-step explanation:
The subject of this question is Business and the grade level is High School.
The business management question focuses on fixed and variable costs for making business operational decisions. It exemplifies with cases where a center earns revenues and how it affects the decision to continue or cease business. Understanding the sum of total costs, which includes both fixed and variable costs, is essential in assessing profitability.
The question provided is situated in the realm of business management and accounting, dealing specifically with costs related to running a business. It involves understanding and managing fixed and variable costs and making decisions based on profitability. In the examples given, the focus is on whether a business should continue operating or shut down based on its revenues and costs. For instance, a center that earns revenues of $20,000 with variable costs of $15,000 should continue in business, as it covers its variable costs and contributes to fixed costs. However, if the revenues fall to $10,000 while the variable costs are $15,000, the center is not even covering its variable costs and should consider shutting down, to avoid further losses. This basic cost analysis is essential for any business to assess its financial situation and make informed decisions.
Total costs are understood here as the sum of fixed costs, which do not vary with the level of production, and variable costs, which do vary directly with the level of production. To illustrate, if we consider the 'Clip Joint' barber shop with fixed costs at $160 per day and variable costs of $80 per barber, hiring two barbers would yield total costs of $320 for that day. This kind of analysis helps to determine at what point a business can achieve profitability or if it is operating at a loss.