Exercise 3-1 (15 minutes) 1. Cups of Coffee Served in a Week 2,000 2,100 2,200 Fixed cost $1,200 $1,200 $1,200 Variable cost 440 462 484 Total cost $1,640 $1,662 $1,684 Average cost per cup of coffee $0.820 $0.791 $0.765 served * * cost ÷ cups of coffee served in a week 2. The average cost of a cup of coffee declines as the number of cups of coffee served increases because the fixed cost is spread over more cups of coffee. Exercise 3-3 (20 minutes) 1. Electrical Days Costs High activity level (August) 2,406 $5,148 Low activity (October) 124 1,588 Change 2,282 $3,560 Variable cost = Change in cost ÷ Change in activity = $3,560 ÷ 2,282 occupancy-days = $1.56 per occupancy-day Total cost (August) $5,148 Variable cost element ($1.56 per occupancy-day × 2,406 occupancy-days) 3,753 cost element $1,395 2. Electrical may reflect seasonal factors other than just the variation in occupancy days. For example, common areas such as the reception area must be lighted for longer periods during the winter than in the summer. This will result in seasonal fluctuations in the fixed electrical costs. Additionally, fixed costs will be affected by the number of days in a month. In other words, costs like the costs of lighting common areas are
Exercise 3-1 (15 minutes) 1. Cups of Coffee Served in a Week 2,000 2,100 2,200 Fixed cost $1,200 $1,200 $1,200 Variable cost 440 462 484 Total cost $1,640 $1,662 $1,684 Average cost per cup of coffee served * $0.820 $0.791 $0.765 * cost ÷ cups of coffee served in a week 2. The average cost of a cup of coffee declines as the number of cups of coffee served increases because the fixed cost is spread over more cups of coffee. Exercise 3-3 (20 minutes) 1. Electrical Costs High activity level (August) 2,406 $5,148 Low activity (October) 124 1,588 Change 2,282 $3,560 Variable cost = Change in cost ÷ Change in activity = $3,560 ÷ 2,282 occupancy-days = $1.56 per occupancy-day Total cost (August) $5,148 Variable cost element ($1.56 per occupancy-day × 2,406 occupancy-days) 3,753 cost element $1,395 2. Electrical may reflect seasonal factors other than just the variation in occupancy days. For example, common areas such as the reception area must be lighted for longer periods during the winter than in the summer. This will result in seasonal fluctuations in the fixed electrical costs. Additionally, fixed costs will be affected by the number of days in a month. In other words, costs like the costs of lighting common areas are Days
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