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GN_ch5_1

# GN_ch5_1 - Exercise 5-1(15 minutes 1 Fixed cost Variable...

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Exercise 5-1  (15 minutes) 1. Cups of Coffee Served  in a Week 1,800 1,900 2,000 Fixed cost \$1,100 \$1,100 \$1,100 Variable cost         468             494             520     Total cost \$1,568 \$1,594 \$1,620 Cost per cup of coffee served * \$0.871 \$0.839 \$0.810 * Total 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 5-3  (20 minutes) 1. Month Occupancy- Days Electrical  Costs High activity level (August). . 3,608 \$8,111 Low activity level (October)..     186       1,712     Change ................................ 3,422 \$6,399 Variable cost = Change in cost  ÷  Change in activity  = \$6,399  ÷  3,422 occupancy-days  = \$1.87 per occupancy-day Total cost (August) ......................................................... \$8,111 Variable cost element  (\$1.87 per occupancy-day  ×  3,608 occupancy-days).   6,747     Fixed cost element ......................................................... \$1,364 2. Electrical costs may reflect seasonal factors other than just the  variation in occupancy days. For example, common areas such as

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GN_ch5_1 - Exercise 5-1(15 minutes 1 Fixed cost Variable...

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