Fixed versus variable cost behavior Lou Jordan needs extra money quickly because his mother’s sudden hospitalization has resulted in unexpected medical bills. Mr. Jordan has learned fortune-telling skills through his long friendship with Jack Lovell, who tells fortunes during the day at the city market. Mr. Lovell has agreed to let Mr. Jordan use his booth to tell fortunes during the evening for a rent of $50 per night.

Required

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

b. Is the cost of renting the fortune-telling booth fixed or variable relative to the number of customers?

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

d. Mr. Jordan has little money. What major business risks would he take by renting the fortune-telling booth? How could he minimize those risks?