Margene owns a cupcake shop. Every time she frosts another cupcake, she uses $0.32 worth of sugar. For Margene, the cost of frosting a cupcake is a component of which of the following?
Explanation
Answer - D - For Margene, the cost of frosting a cupcake is a component of marginal cost, total costs, and total variable costs.
Key Takeaway: Remember that variable costs change with output and marginal cost refers to the cost of producing one more unit. Margene’s cupcakes would qualify for both of these. And obviously, frosting a cupcake would be factored into total costs. The cost of frosting is variable because if she can stretch the sugar to frost more cupcakes, the unit cost of the sugar will decrease.
