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.

page revision: 2, last edited: 09 Mar 2009 19:14