Evonne_6965
Jan 30, 2011, 06:46 AM
Brief Exercise 5-1 Fixed and Variable Cost Behavior
Espresso Express
Cups of Coffee Served in a Week
Costs 2,000 2,100 2,200
Fixed Cost
Varialble Cost
Total Costs
Average cost per cup of coffee served
Please help me solve this.
pready
Jan 31, 2011, 10:34 AM
From the information provided you do not have enough information. Also your costs do not make sense.
A fixed cost is a cost that stays the same regardless of how many cups of coffee you make in a time. For example you have to pay a certain amount of rent, mortgage payment, utilities, depreciaiton, etc...
A variable cost on the other hand is a cost that changes based on how many cups of coffee you make in a time. For an example cost of cups, labor, etc. If you make 10 cups of coffee you will have the cost of 10 cups, while on the other hand if you make 1,000 cups of coffee you will have the cost of 1,000 cups. For 10 cups you may only have 1 employee work 1 hour, but for 10,000 cups you may have more than one employee working for more that one hour.
Total costs are your fixed costs plus your variable costs added together.