Question

Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $2,000 and the variable cost per cup of coffee served is $0.77.

Required:

1. Fill in the following table with your estimates of the company's total cost and average cost per cup of coffee at the indicated levels of activity.

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?

Complete this question by entering your answers in the tabs below.

Required 1

Required 2

Fill in the following table with your estimates of the company's total cost and average cost per cup of coffee at the indicated levels of activity. (Round off the average cost per cup of coffee to the nearest tenth of a cent.)

	Cups of Coffee Served in a Week
	2,200	2,300	2,400
Fixed cost
Variable cost
Total cost	$0	$0	$0
Average cost per cup of coffee served

Answer 1

1)

Cups of Coffee served in a week	2200	2300	2400
Fixed cost (it will remain the same irrespective of the no. of cups)	$2000	$2000	$2000
Variable Cost	2200 x $0.77 = $1694	2300 x $0.77 = $1771	2400 x $0.77 = $1848
Total cost	$3694	$3771	$3848
Average cost per cup of coffee served	$3694 / 2200 = $1.68	$3771 / 2300 = $1.64	$3848 / 2400 = $1.60

2) We can observe from the above that the average cost per cup of coffee served increases with increase in the number of cups served.