Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 42

Average and Total Costs The Accounting Students Association wants to have a Christmas party for its members. The cost of renting space is $1,500, and the cost of refreshments will be $12 per person.

Required

1. What is the total cost if 100 people attend? What is the average cost?

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2. What is the total cost if 200 people attend? What is the average cost?

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3. Explain why average total cost differs with changes in total attendance.

Step 1 of 4

Fixed costs are those costs which does not changes with change in level of production. Variable costs are those costs which changes with change in level of production. The sum of fixed and variable costs is total cost for the company. Average cost is total cost divided by units produced.