Answer:
- see attached
- average cost decreases as volume increases
Step-by-step explanation:
1.
The problem statement tells you the fixed cost is $1800. It is "fixed" because it does not depend on the number of cups sold.
The variable cost per cup sold is said to be $0.59, so the total variable cost for a week will be the product of that value and the number of cups sold.
Fixed and variable costs are added to get the Total Cost. Total cost is divided by the number of cups sold to get the Average Cost. A spreadsheet performs this math nicely. (See attached.)
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2.
If you consider the equation for average cost based on the above description, you see is its ...
ac = tc/q = (fc +vc)/q = (1800 + 0.59q)/q
ac = 1800/q +0.59
where ac=average cost; tc=total cost; fc=fixed cost; vc=variable cost; q=quantity sold
You can see that the average cost will go down as quantity increases, because it spreads the fixed cost over a larger number of cups.
