Question

Espresso Express operates a number of espresso coffee stands in busy suburban malls. The foxed weekly expense of a coffee stand is $1,100 and the variable cost per cup of coffee served is $0.58 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 1,100 1,200 1,300 Fwed cost Variable cost Total cost Average cost per cup of coffee served Required 2 >

Answer 1

Ans:

Required 1:

Variable cost/unit and total Fixed costs do not change with change in units.

	1100	1200	1300
Fixed costs	$1100	$1100	`$1100
Variable costs	(1100*0.58)=$638	(1200*0.58)=$696	`(1300*0.58)=$754
Total costs	$1738	$1796	$1854
Average cost(Total cost/Cups of coffee served)	(1738/1100)=$1.58	(1796/1200)=$1.497	(1854/1300)=$1.426

Required 2:

Average cost per cup of coffee served decreases when the cups of coffee served in the week increases.