exercise 1-4 (static) fixed and variable cost behavior lo1-4 espresso express operates a number of espresso…

exercise 1-4 (static) fixed and variable cost behavior lo1-4 espresso express operates a number of espresso coffee stands in busy suburban malls. the fixed weekly expense of a coffee stand is $1,200 and the variable cost per cup of coffee served is $0.22. required: 1. fill in the following table with your estimates of the companys total cost and average cost per cup of coffee at the indicated levels of activity. (round the “average cost per cup of coffee served” to 3 decimal places.) 2. does the average cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases? complete this question by entering your answers in the tabs below. required 1 required 2 fill in the following table with your estimates of the companys total cost and average cost per cup of coffee served at the indicated levels of activity. (round the “average cost per cup of coffee served” to 3 decimal places.) fixed cost variable cost total cost average cost per cup of coffee served 2,000 cups of coffee 2,100 cups of coffee 2,200 cups of coffee $ $ $ 0 0 0 required 2 >

exercise 1-4 (static) fixed and variable cost behavior lo1-4 espresso express operates a number of espresso coffee stands in busy suburban malls. the fixed weekly expense of a coffee stand is $1,200 and the variable cost per cup of coffee served is $0.22. required: 1. fill in the following table with your estimates of the companys total cost and average cost per cup of coffee at the indicated levels of activity. (round the “average cost per cup of coffee served” to 3 decimal places.) 2. does the average cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases? complete this question by entering your answers in the tabs below. required 1 required 2 fill in the following table with your estimates of the companys total cost and average cost per cup of coffee served at the indicated levels of activity. (round the “average cost per cup of coffee served” to 3 decimal places.) fixed cost variable cost total cost average cost per cup of coffee served 2,000 cups of coffee 2,100 cups of coffee 2,200 cups of coffee $ $ $ 0 0 0 required 2 >

Answer

Explanation:

Step1: Recall cost - formula relationships

The total cost formula is $TC = FC+VC$, where $TC$ is total cost, $FC$ is fixed cost and $VC$ is variable cost. The average cost per unit formula is $AC=\frac{TC}{Q}$, where $Q$ is the quantity of output. Given $FC = 1200$, $VC$ per cup $= 0.22$.

Step2: Calculate total cost and average cost for 2000 cups

For $Q = 2000$ cups: $VC=0.22\times2000 = 440$ $TC=FC + VC=1200 + 440=1640$ $AC=\frac{TC}{Q}=\frac{1640}{2000}=0.820$

Step3: Calculate total cost and average cost for 2100 cups

For $Q = 2100$ cups: $VC=0.22\times2100 = 462$ $TC=FC + VC=1200+462 = 1662$ $AC=\frac{TC}{Q}=\frac{1662}{2100}\approx0.791$

Step4: Calculate total cost and average cost for 2200 cups

For $Q = 2200$ cups: $VC=0.22\times2200 = 484$ $TC=FC + VC=1200 + 484=1684$ $AC=\frac{TC}{Q}=\frac{1684}{2200}\approx0.765$

Step5: Analyze the trend of average cost

As the number of cups served increases, the average cost per cup decreases because the fixed - cost is spread over more units.

Answer:

Cups of Coffee Total Cost ($) Average Cost per Cup ($)
2000 1640 0.820
2100 1662 0.791
2200 1684 0.765
The average cost per cup of coffee served decreases as the number of cups served in a week increases.