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 $0.24.

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 Each Week
	2400	2500	2600
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

Answer 1

	Cups of Coffee Served in a Week
	2400	2500	2600
Fixed cost	$     1,700	$       1,700	$       1,700
Variable cost 0.24*2400,0.24*2500,0.24*2600	$       576	$          600	$          624
Total cost	$     2,276	$       2,300	$       2,324
Average cost per cup of coffee served	0.948	0.920	0.894
	2276/2400	2300/2500	2324/2600
2	Decrease
	because the fixed cost is spread over more cups of coffee