Distinguish fixed costs from variable costs with two examples each in a food service operation.

• A. Fixed costs remain constant regardless of sales (rent, depreciation); variable costs rise with sales (food ingredients, hourly labor)
• B. Fixed costs vary with sales; examples: food costs, utilities; Variable costs are constant; examples: rent, insurance
• C. Fixed costs depend on customer volume; examples: tips, service charges; Variable costs depend on weather; examples: fuel, maintenance
• D. Fixed costs include marketing; Variable costs include payroll

Answer: (A)

Fixed costs stay the same no matter how many meals you serve, while variable costs change with sales or production. In a food-service operation, rent and depreciation are classic fixed costs because they don’t swing with daily or weekly volume. As sales rise, you still pay the same rent and your equipment loses value at a steady rate. Variable costs, like food ingredients and hourly labor, grow as you sell more—more customers means more ingredients to prepare and more hours needed to handle the busier period.

This framing matches the best answer: it correctly labels rent and depreciation as fixed costs and shows food ingredients and hourly labor increasing with sales as variable costs. The other descriptions mix up cost behavior: fixed costs shouldn’t vary with sales, and the examples given for fixed or variable costs don’t align with how costs typically behave in a restaurant (tips or service charges, weather-dependent costs, marketing, or payroll in a simplistic fixed-vs-variable split).