Midterm 2 Total Cost

Use the following criteria to answer the questions.

  • Fixed Cost = $150.00/day
  • Variable Cost = $5.00/meal served
  • Revenue = $7.00/meal served

Imagine a lunch cart serving high-end food items.

1) What would the total cost be when you sell 20 meals a day?

A) $155.00
B) $290.00
C) $250.00
D) None of the above

ANSWER: To find the total cost, we would use the equation TC=FC+VC. By plugging in our data, we would get the equation of TC = $150.00 + $5.00(20). This would give us a total cost of $250.00, which is answer C.

2) How many meals would need to be served to have a total cost of $155.00? $290.00?

ANSWER: We would set up the equation in a similar manner as previously, but this time with our new data. Use the equation $155.00 = $150.00 + $5.00x. Basic algebra would tell us that we only need to sell one meal to accumulate a total cost of $155.00.

Similarly, we would set up the next equation as $290.00 = $150.00 + $5.00x. Basic algebra would tell us that to achieve a total cost of $290.00, we would need to sell 28 meals.

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