Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,100 and the variable cost per cup of coffee served is $0.72.

Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,100 and the variable cost per cup of coffee served is $0.72.

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?

Explanation

1.

Average cost per cup of coffee served = Total cost ÷ Cups of coffee served in a week

2.

The average cost of a cup of coffee decreases as the number of cups of coffee served increases because the fixed cost is spread over more cups of coffee.

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