You are a CPA who belongs to a downtown business club. Annual dues are $150. You use the club solely for lunches, which cost $9 each. You have not used the club much in recent years, and you are wondering whether to continue your membership.
1. You are confronted with a variable-cost plus a fixed-cost behavior pattern. Plot each on a graph, where the vertical axis is total cost and the horizontal axis is annual volume in number of lunches. Also plot a third graph that combines the previous two graphs.
2. What is the cost per lunch if you pay for your own lunch once a year? Twelve times a year? Two hundred times a year?
3. Suppose the average price of lunches elsewhere is $10.
(a) How many lunches must you have at the luncheon club so that the total costs of the lunches would be the same, regardless of where you ate for that number of lunches?
(b) Suppose you ate 200 lunches a year at the club. How much would you save in relation to the total costs of eating elsewhere?

  • CreatedNovember 19, 2014
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