1. Fixed and variable cost behavior
Koffee Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,100 and the variable cost per cup of coffee served is $0.26.
Required:
1.) Fill in the following table with your estimates of total cost and average cost per cup of coffee at the identical level of activity for a coffee stand. Round off the cost of a cup of coffee to the nearest tenth of a cent.
2.) Does the average cost per cup of coffee served increase, decrease, or remain the same at the number of cups of coffee served in a week increases? Explain
Cups of coffee served in a week
1,800 1,900 2,000
Fixed cost
Variable cost
Total cost
Average cost
2. (Traditional and Contribution Format Income statement)
Redhawk, Inc., is a merchandiser that provided the following information:
Number of units sold………………………………………… 10,000
Selling price per unit………………………………………… $15
Variable selling expense per unit……………………………. $2
Variable administrative expense per unit……………………. $1
Total fixed selling expense…………………………………… $20,000
Total fixed administrative expense…………………………… $15,000
Merchandise inventory, beginning balance…………………… $12,000
Merchandise inventory, ending balance………………………. $22,000
Merchandise purchases……………………………………… $90,000
Required:
1.) Prepare a traditional income statement
2.) Prepare a contribution format income statement