Accounting and Economic Costs. Four high school students are considering operating a coffee cart at the Australian Tennis Open during the summer break. This is an alternative to summer employment with a local Target, where they would each earn $5,000 over the three-month summer period. A fully equipped facility can be leased at a cost of $5,000 for the summer. Additional projected costs are $1,800 for insurance and $1.20 per unit for materials and supplies (e.g. water, milk, coffee etc.). Their coffees would be priced at $5.20 per unit.

A.What is the accounting cost function for this business? (1 Mark)

B.What is the economic cost function for this business? (1 Mark)

C.How many coffees will they have to sell to breakeven? (Assume a $5.20 price and ignore interest costs associated with the timing of lease payments.) (2 Marks)