Question

Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,600 and the variable cost per cup of coffee served is $0.34. Required: 1. Fill in the following table with your estimates of the company's total cost and average cost per cup of coffee at the indicated levels of activity. 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 company's 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.) Cups of Coffee Served in a Week 2,100 2,200 2,300 Fixed cost Variable cost Total cost Average cost per cup of coffee served Required 2 >

Answer 1

	Cups of coffee served in a week
	2100	2200	2300
Fixed Cost	$1600	$1600	$1600
Variable Cost	0.34*2100=$714	0.34*2200=$748	0.34*2300=$782
Total Cost	1600+714=$2314	1600+748=$2348	1600+782=$2382
Average Cost per cup of Coffee served	2314/2100=$1.102	2348/2200=$1.067	2382/2300=$1.035

1.The above table shows the calculation of total cost of the company and the average cost per cup of Coffee served

2.As the number of coffee served in a week increases the average cost per cup of Coffee is decreasing. From the above table this fact is clear. The reason for this is as the number of units increases the fixed cost per unit decreases and the variable cost per unit remains the same. As the units are increasing, the fixed coat of $1600 is getting shared by more number of units which would lead to reduction in per unit cost of each cup of coffee.