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
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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.  The variable cost per unit processed can be estimated as follows  using the 8,000-unit level of activity, which falls on the straight line:
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Chapter 5 Demo Solution - BriefExercise51(15minutes) 1....

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