Espresso Express operates a number of espresso coffee stands in busy suburban ma

Question

Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,300 and the variable cost per cup of coffee served is $0.65. Required: 1. Fill in the following table with your estimates of total costs and cost per cup of coffee at the indicated levels of activity for a coffee stand. (Round the Average cost per cup of coffee served to 3 decimal places.) Cups of Coffee Served in a Week 1,200 1,300 1,40 Fixed cost Variable cost Total cost Average cost per cup of coffee served 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? Increase Decrease O Remain the same

Explanation / Answer

2)decrease as number of cups increases . This is so because fixed cost is deferred or allocated to more number of cups

1200 1300 1400 Fixed cost 1300 1300 1300 Variable cost 780    [1200*.65 ] 845    [.65*1300] 910    [.65*1400] Total cost 2080 2145 2210 Average cost per cup 2080/1200= 1.733 2145/1300= 1.65 2210/1400= 1.579

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