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Goes-Down-Smooth operates a number of smoothie bars in busy suburban malls
Goes-Down-Smooth operates a number of smoothie bars in busy suburban malls. The fixed weekly expense of a smoothie bar is $2,500, and the variable cost per smoothie served is $0.75.
Required: 1. Fill in the following table with your estimates of total costs and cost per smoothie at the indicated levels of activity for a smoothie bar. (Round your "Cost per smoothie served" answers to 2 decimal places.)
Smoothies Served in a Week 2,100 2,800 3,500 Fixed cost Variable cost Total cost Cost per smoothie served
2. Does the cost per smoothie increase, decrease, or remain the same as the number of smoothies served in a week increases?
Increases
Decreases
Remain the same
Expert Solution
Answer:
1.
Fixed costs is same for all levels,
Variable cost is 0.75 multiplied by smoothies served.
Total cost is the sum of the fixed and variable cost
Cost per smoothie is total cost divided by smoothies served.
2.
The cost per smoothie will decrease as fixed costs will still be the same, and we will be selling more smoothies at less avg. cost per smoothie.
PFA
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