Question 1:

Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $900 and the variable cost per cup of coffee served is $0.50.

Required:

1. Fill in the following table with your estimates of the company's total cost and average cost per cup of coffee at the indicated levels of activity.

2. Does the average cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases?

Question 2:

Cherokee Inc. is a merchandiser that provided the following information:

Number of units sold13,000

Selling price per unit $17

Variable selling expense per unit $2

Variable administrative expense per unit $3

Total fixed selling expense $20,000

Total fixed administrative expense $13,000

Beginning merchandise inventory $9,000

Ending merchandise inventory $23,000

Merchandise purchases $86,000

Required:

1. Prepare a traditional income statement.

2. Prepare a contribution format income statement.