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 $1,700 and the variable cost per cup of coffee served is $0.15. 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 600 700 800 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 Remain the same

Explanation / Answer

1) Solution:

Cups of coffee served in a week

600

700

800

Fixed cost

1,700

1,700

1,700

Variable cost

90

105

120

Total cost

1,790

1,805

1,820

Average cost per cup of coffee served

2.983

2.579

2.275

Working:

Cups of coffee served in a week

600

700

800

Fixed cost

1,700

1,700

1,700

Variable cost

600*0.15

700*0.15

800*0.15

Total cost

1700+90

1700+105

1700+120

Average cost per cup of coffee served

2.983

2.579

2.275

2) Solution: decrease

Explanation: Because the fixed cost is spread over more cups of coffee thus the average cost of a cup of coffee decreases when the number of cups of coffee served increases

Cups of coffee served in a week

600

700

800

Fixed cost

1,700

1,700

1,700

Variable cost

90

105

120

Total cost

1,790

1,805

1,820

Average cost per cup of coffee served

2.983

2.579

2.275

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