Question

At a restaurant, the total variable cost for May were $16,000. With 4,000 meals sold, the average variable cost per meal sold was $4. For June, the manager expects to sell 10% more meals than in May. If the increase in sales volume occurs, the manager should expect that the total variable costs for June would be:

A) $14,400
B) $16,400
C) $17,600
D) $18,400

Answer 1

To find the expected total variable costs for June, we need to calculate the average variable cost per meal sold in May and then use that to estimate the total variable costs for June. The manager should expect that the total variable costs for June would be $17,600.

Step-by-step explanation:

To find the expected total variable costs for June, we need to calculate the average variable cost per meal sold in May and then use that to estimate the total variable costs for June. In May, the total variable costs were $16,000 for 4,000 meals sold, which gives us an average variable cost of $4 per meal. Since the manager expects to sell 10% more meals in June, we can calculate the expected total variable costs as follows:

Total variable costs for June = Total variable costs for May * (1 + Sales increase)

Total variable costs for June = $16,000 * (1 + 0.10)

Total variable costs for June = $16,000 * 1.10 = $17,600

Therefore, the manager should expect that the total variable costs for June would be $17,600 (Option C).