Posted by **Fred** on Monday, March 5, 2012 at 10:07pm.

1. Suppose you are the owner of a tile company who purchases tiles from a supplier at a rate of $5 each.

a. The variable cost is the cost that depends on the quantity, such as how many tiles are purchased. If you buy 100 tiles at $5 each, how much have you spent on tile? What if you buy 500 tiles? (As required with every calculation on the worksheet, please demonstrate your steps even though you may be able to calculate mentally.)

b. The fixed cost does not depend on the quantity that you purchase. For example, an ATM fee at the gas pump is a flat amount that does not depend on how many gallons of gas are purchased. It is fixed (not variable) cost.