Fixed versus variable cost behavior In the evenings, Lou Jordan works telling fortunes using his friend Jack Lovell’s booth at the city market. Mr. Lovell pays the booth rental, so Mr. Jordan has no rental cost. As a courtesy, Mr. Jordan provides each customer a soft drink. The drinks cost him $0.50 per customer.

Required

a. What is the soft drink cost both in total and per customer if the number of customers is 5, 10, 15, 20, or 25?

b. Is the soft drink cost fixed or variable?

c. Draw two graphs. On one, plot total soft drink cost for 5, 10, 15, 20, and 25 customers; on the other, plot soft drink cost per customer for 5, 10, 15, 20, and 25 customers.

d. Comment on the likelihood that Mr. Jordan will incur a loss on this business venture.