Question

Express Deli is a company that has several natural shake kiosks operating in various shopping centers. Each kiosk has a fixed cost of $ 880 and a variable cost of $ 0.55 for each whisk. 1. Complete the following table of estimated costs in the different activity levels (beats served per week) presented in each column. (Value: 12 points) Total shakes served in one week 1,520 1,440 1.600 Fixed cost Variable cost Total cost Average cost per whisk served 2. Explain how the average cost per serving served varies as the activity level increases and why. (3 points) Exercise C: Relevant costs (Differential Costs ), opportunity (portunity ) and unrecoverable ( sunk) (Value: 7 points) Juan González owns a small condominium of 8 apartments on the coast, very close to a beach and tourist area. The condo has a laundry room with 3 washers and 3 electric dryers on the first floor and the owner wishes to replace the old washers and dryers with new ones that will represent water and energy savings as they would be gas dryers. The condominium manager suggests that it would be better to invest the money in enabling a room that is available as an entertainment area and put a large TV, a pool table and a ping-pong table to attract more customers. For each of the following cost items, indicate what type of cost would be considered: Relevant cost (CP), opportunity costs (CO) or unrecoverable costs (CI). If no category applies, type N/A. Cost of the new washing machines Cost of electricity and water of the new washing machines Maintenance cost of old washers and dryers Benefits of the entertainment room Cost of removing old washers and dryers Entertainment room maintenance | Preparation costs and equipment of the new entertainment room

Answer 1

Answer-1-

		Total Shakes served in one week
Total shakes served in one week (n)	1,440	1,520	1,600
Fixed Cost	$880	$880	$880
Variable Cost ($0.55*n)	$792	$836	$880
Total Cost (Fixed +Variable)	$1,672	$1,716	$1,760
Average Cost (Total cost/ n)	$1.16	$1.13	$1.10

2-The average cost per serving served varies as the activity level increases because:-

(1)-Variable cost for each whisk is constant i.e.$0.55

(2)-Fixed cost per whisk decreases as activity level increases

(3)-Hence the average cost per serving decreases with increase in activity level.

C-

Cost of the new washing machines	Relevant Cost (CP)
Cost of electricity and water of the new washing machines	Relevant Cost (CP)
Maintenance cost of old washers and dryers	Opportunity Cost (CO)
Benefits of the entertainment room	Relevant Cost (CP)
Cost of removing old washers and dryers	Unrecoverable Cost (CI)
Entertainment room maintenance	Relevant Cost (CP)
Preparation costs and equipment of the new entertainment room	Relevant Cost (CP)