Westerlund Owns a Picture-Framing Shop,The Caplow Co

Multiple Choice

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 costs for a typical framed picture,which consists of $5 for glass,$2 for matting,$13 for the frame,and $30 for the labor 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 matte-cutting machine in order to reduce the number of hours of direct labor required to produce a framed picture.In considering this purchase,she should recognize this purchase will __________ Caplow's variable cost and __________ Caplow's fixed cost.

A) decrease; increase
B) decrease; decrease
C) increase; decrease
D) increase; increase
E) have no effect on; have no effect on