Reference no: EM1347654

On the first day of the New Year to get her business started, the owner/photographer of Exquisite Portraits Inc. paid $200 for business cards, $1,000 for a listing in Yellow Pages, and $250 for annual business license. She also leased a professional portrait camera and studio lighting equipment by signing an agreement to pay a monthly lease $1,000 each month for the next 12 month. This lease is ironclad: She must pay for all 12 month and she cannot sublease to anyone else. She rents her office and studio for $1400 per month that must be paid at the beginning of each month. She does not have a lease on the office/studio, so she can vacate the office/studio at the end of any month should she decide to move to a new location or to go out of business. After she opens the office/studio on the first day of each month, her monthly cost of electricity for lighting the office and running her coffee machine is constant at $45 per month, because she always keeps the lights on in the office and drinks the same amount of coffee no matter how many photos she shoots each month. Additional electricity is required for the portrait studio light, which varies directly with the number of hours the lights are used each month for photo sessions. Last year, before starting this business, the owner of Exquisite Portraits Inc. earned a salary of $5,000 per month working at a bank. Answer the following questions about the costs for Exquisite Portrait Inc.

a. Illustrate what are monthly fixed costs, quasi-fixed costs, and variable cost for Exquisite Portraits Inc.?

c. At the end of August, what role would the sunk costs play in the owner/photographer's decision to go out of business?