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