Chapter 5 Demo Solution

# Chapter 5 Demo Solution - BriefExercise51(15minutes 1...

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Brief 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.

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Brief Exercise 5-2  (30 minutes) 1. The completed scattergraph is presented below: 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 0 2,000 4,000 6,000 8,000 10,000 Units Processed Total Cost
Brief Exercise 5-2  (continued) 2. (Students’ answers will vary considerably due to the inherent  imprecision and subjectivity of the quick-and-dirty scattergraph  method of estimating variable and fixed costs.)  The approximate monthly fixed cost is \$6,000—the point where the  straight line intersects the cost axis.

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