Jane Westerlund Owns a Picture-Framing Shop, the Caplow Co

Multiple Choice

Jane Westerlund owns a picture-framing shop, The Caplow Co. The average price she receives for a picture she frames for a customer is $120. This price must cover her average costs for a typical framed picture of $5 for glass, $2 for matting, and $13 for the frame, and $30 for the labour involved. She must also cover monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and
$3,500 for her salary. Westerlund is considering buying an automatic mat-cutting machine in order to reduce the number of hours of direct labour required to produce a framed picture. In considering this purchase, she should recognize it will ________ Caplow's variable cost and ________Caplow's fixed cost.

A) increase; decrease
B) increase; increase
C) decrease; increase
D) decrease; decrease