Espresso Express operates a number of espresso coffee stands

Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $2,400 and the variable cost per cup of coffee served is $0.18. 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 1Required 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 1,900 2,000 2,100 Fixed cost Variable cost Total cost Average cost per cup of coffee served

Solution

Solution :

Total fixed cost is constant over a given level of production while the variable cost per unit is constant too. Hence , as the total output increases the total costs would increase but the cost per unit would reduce .

1. Please refer the below chart for the Analysis of Cost.

2. The average cost per cup of coffee decreases as the number of coffee cups increase in a week.

a	Cups Served in a week		1900		2000		2100
b	Total Fixed Cost		2400		2400		2400
c	Variable cost per coffee served	0.18		0.18		0.18
d	Total Variable Cost		342		360		378
e	Total Cost		2742		2760		2778
	Average cost ( e/a)		1.44		1.38		1.32