Question

Chill Out Novelties sells ice cream bars from a kiosk near campus. Fixed costs are $270 per week and the variable cost is $2.00 per ice cream bar. Complete the following table for the levels of ice cream bars sold per week. (Round your cost per bar answers to 2 decimal places.)

Number of Ice Cream Bars	420	970	1,370
Total Fixed Cost
Fixed Cost per Bar
Variable Cost per Bar
Total Variable Cost
Total Cost
Cost per Bar

Answer 1

Fixed costs are constant and total fixed costs will remain same at all levels of activity

Total Variable costs varies with change in activity however per unit variable cost remains same

I have mentioned formulas for you understanding

Number of Ice Cream Bars	420	970	1,370
Total Fixed Cost	$270	$270	$270
Fixed Cost per Bar [Total fixed cost/number of icecream bars]	$0.64[$270/420]	$0.28[$270/970]	$0.20[$270/1370]
Variable Cost per Bar	$2	$2	$2
Total Variable Cost [number of bars*variable cost per bar]	$840[$2*420]	$1,940[$2*970]	$2,740[$2*1,370]
Total Cost [Fixed cost +variable cost]	$1,110[$270+840]		$2,210[270+1940]	$3,010[$270+2,740]
Cost per Bar [Total cost/ Number of bars]	$2.64[$1,110/420]		$2.28[$2,210/970]	$2.20[$3,010/1370]

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