Question

Hubert is an entrepreneurial student. Before the start of the Spring Semester, he purchased the "all sports package" for his cable. His plan was to charge friends $2 each to watch boxing matches, football games, futbol games, fencing, jai-alai, and many other popular sporting events.

The package costs $500. Hubert figured he could have 150 events during 2020, and would average 10 "guests" per event. Each guest would be entitled to watch the entire game, one Little Debbie Snack Cake, and one Soda. The cost of each Snack cake is $.25 and the cost of each soda is $.75.

If Hubert has 1500 guests in total, what is the average variable cost?

Answer 1

He purchases the Sports package for $500. This is his fixed cost as it does not depend on the number of guests.

Each guest recieves one Little Debbie Snack Cake, and one Soda. The cost of each Snack cake is $.25 and the cost of each soda is $.75. Therefore, he provides materials worth $1 ($0.25+$0.75) to each guest. Since the amount of snacks needed depends on the number of guests, it is a variable cost.

Total Variable Cost= 1500*1

Total Variable Cost= $1500

Average Variable Cost = $1

His average variable cost is $1 which is the amount spent on snacks provided to each guest.