You’re starting a lemonade stand in front of your house. You’ve already obtained a permit from City Hall in order to do so. For your stand, your neighbor agrees to let you use his nice large table for $5 per day (this cost is known as fixed cost because it will not change whether you sell one cup or 100 cups of lemonade). Your parents give you full access to the fridge’s filtered water but require you to take care of the cost of the other ingredients and expenses that go into making your final product. After a day or two of starting your business, you determine that the cost of paper cups, sugar and fresh lemon juice is $0.32 per cup (this cost is known as variable cost because it changes according to the number of cups you sell).
