his Question 10 pts This Quiz 55 pts possible F8 F4F5 W E So

his Question: 10 pts This Quiz: 55 pts possible F8 F4F5 W E

Solution

1.

Variable cost per guest = $16 per guest

Fixed cost upto 14,400 guests = $117,000

Equation for total cost upto 14,400 guests:

Y = $16x + $117,000

2a.

Total costs for serving 13,000 guests = $16*13,000 + $117,000 = $325,000

2b.

Average cost per guest = Total costs / Number of guests

Average cost per guest at 13,000 guests = $325,000/13,000 guests = $25 per guest

3a.

Total cost of serving 11,600 guests (using equation) = $16*11,600 + $117,000 = $302,600

3b.

Total cost of serving 11,600 guests (using average cost) = $25*11,600 guests = $290,000

3c.

There is a difference in the two cost estimates because the average cost per guest changes as the volume changes due to the allocation of the buffet’s costs. The fixed cost per unit increases as the volume decreases, while the variable cost per unit remains same.

4.

Total fixed costs for serving more than 14,400 guests = $117,000 + $24,000 = $141,000

Cost equation; y = $16x+ $141,000

5.

Estimate total costs for serving 15,100 guests = $16*15,100 guests + $141,000 = $382,600