You are in charge of concessions at a major sports venue. You have determined th

Question

You are in charge of concessions at a major sports venue. You have determined that the Total Concessions Expense for the last year was $3,500,000. You have analyzed your expenses and found that $1,000,000 is fixed and $2,500,000 is variable. You further know that the variable expense cost driver is the number of people attending sporting event at the venue last year. Total attendance was 2,000,000. What is the cost function that can be used to predict Total Concession Expense for next year?

Your answer format is.... "$#,###,### + $#.## per person"

Explanation / Answer

NOTE:Total fixed cost and variable cost per unit do not change with change in units.

Variable cost per person=$2,500,000/2,000,000=$1.25 per person

Hence cost function=$1,000,000+$1.25 per person.

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