Question

Exercise 1-4 Fixed and Variable Cost Behavior [LO1-4] Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $2,100 and the variable cost per cup of coffee served is $0.78. 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? Answer is not complete. 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 the "Average cost per cup of coffee served" to 3 decimal places.) ............................................................................................................................................................................. Cups of Coffee Served in a Week 2,400 2,500 2,600 Fixed cost Variable cost $ 2$ 2$ Total cost Average cost per cup of coffee served < Required 1 Required 2

Answer 1

Espresso Express :

Required 1 :
	Cups of Coffee Served in a Week
	2400	2500	2600
Fixed cost	2100	2100	2100
Variable cost [ Cups of coffee served in a week * 0.78 ]	1872	1950	2028
Total cost	3972	4050	4128
Average cost per cup of coffee served [ Total cost / Cups of coffee served in a week ]	1.655	1.620	1.588

Required 2 :

Answer : Decreases

Kubin Company :

Required 1 :
	27500 units
Direct materials ( 27500 * 8.40 )	231000
Direct labor ( 27500 * 5.40 )	148500
Variable manufacturing overhead ( 27500 * 2.90 )	79750
Fixed manufacturing overhead ( 27500 * 6.40 )	176000
Total amount of product cost	635250

Required 2 :
	27500 units
Fixed selling expense ( 27500 * 4.90 )	134750
Fixed administration expense ( 27500 * 3.90 )	107250
Sales commissions ( 27500 * 2.40 )	66000
Variable administrative expense ( 27500 * 1.90 )	52250
Total amount of period cost incurred	360250

Required 3 :
	31000 units
Direct materials ( 31000 * 8.40 )	260400
Direct labor ( 31000 * 5.40 )	167400
Variable manufacturing overhead ( 31000 * 2.90 )	89900
Fixed manfacturing overhead	176000
Total amount of product costs	693700

Required 4 :
	24000 units
Fixed selling expense	134750
Fixed administrative expense	107250
Sales commission ( 24000 * 2.40 )	57600
Variable administrative expense ( 24000 * 1.90 )	45600
Total amount of period costs	345200

Note : Fixed expense calculated from the given data of 27500 units will remain even when the number of products differs