Sharif has a burrito cart where he sells burritos and cans of soda in downtown H
ID: 2445157 • Letter: S
Question
Sharif has a burrito cart where he sells burritos and cans of soda in downtown Hartford. The cost of the cart and his non-food supplies (cleaning supplies, license, transportation, propane) is about $50 per day and seems relatively independent of how many burritos that he sells. His cost of sodas is $0.30 each and the variable cost of burritos is $1.25 each. Sharif sells the burritos for $4.00 and the sodas for $1.50. On a typical summer day, he consistently sells 100 burritos and 50 sodas.
How much profit does Sharif earn on a typical day?
A customer tells him that he really likes Sharif’s burritos and is having an office party. He would like to buy 50 burritos, but pay only $2.50 each (he will still buy one at $4.00 like he usually does). Nobody else in his office buys Sharif’s burritos.
Unfortunately, Sharif only has enough supplies to make 130 burritos that day, and can’t get more supplies until tomorrow.
What are the day’s profit if Sharif sells the 50 special price burritos?
Ignoring any marketing concerns (repeat business, increasing market exposure, etc.), should Sharif sell the 50 burritos at $2.50 each?
Yes____ No____
Explanation / Answer
How much profit does Sharif earn on a typical day?
What are the day’s profit if Sharif sells the 50 special price burritos?
Ignoring any marketing concerns (repeat business, increasing market exposure, etc.), should Sharif sell the 50 burritos at $2.50 each?
Yes, since the net income of Shariff is increasing post the special order.
Particulars Burritos Sodas Total Number of items 100 50 Sale Price p.u. 4.00 1.50 Less: Cost of Sales 1.25 0.30 Contribution p.u. 2.75 1.20 Total Contribution (contributon p.u. * No. of items) 275.00 60.00 335.00 Less: Cost of cart and non food supplies 50.00 Net Income 285.00Related Questions
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