Question
Dolph and Evan started the De restaurant in 2015 . They rented a building, bought equipment , and hired two employees to work full time
Dolph and Evan started the De restaurant in 2015 . They rented a building, bought equipment , and hired two employees to work full time at a fixed monthly salary. Utilities and other operating charges remain fairly constant during each month. During the past two years, the business has grown with average sales increasing 1% a month. This situation pleases both dolph and Evan, but they do to understand how sales can grow by 1% a month while profits are increasing at an even faster pace. They are afraid that one day they will wake up at increasing sales but decreasing profits. Required: Explain why the profits have increased at a faster rate than sales. use the terms variable costs and fixed costs in your response.
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